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Childcare Reform Package

Volume 735: debated on Wednesday 28 June 2023

With permission, Madam Deputy Speaker, I would like to make a statement about the progress we have made towards delivering the genuinely radical childcare reforms announced in the Chancellor’s spring statement.

The Chancellor announced that from September 2025, working parents will be able to access 30 hours a week of childcare, for 38 weeks a year, from the term after their child turns nine months to when they start school. I am pleased to announce that from today, the Department for Work and Pensions has raised the amount working parents on universal credit can claim for their childcare to £951 a month for one child and £1,630 for two or more children. That is an increase of roughly 50% from the previous limits, which were £646 for one child or £1,108 for two or more children.

The Government are also helping eligible parents to cover the costs for the first month of childcare when they enter work or increase their working hours. Those parents will now receive up to 85% of the first month’s childcare costs back before next month’s bills are due, meaning that from then on they should have the money to pay for childcare one month in advance.

When I have spoken to families on universal credit, many have told me that they have struggled with up-front childcare bills, making it harder for them to get back into work. These childcare reforms support one of the Prime Minister’s five key priorities—to grow the economy—by giving families on universal credit up to £522 extra each month to cover childcare costs. This is a transformational package that is designed to remove as many barriers to work as possible.

The evidence is clear: the earliest years, before a child goes to school, are the most critical stage of a young child’s development. That is when they are learning most rapidly, and when the foundations are being laid for future success.

We are also committed to improving the availability of wraparound childcare. Reliable wraparound childcare, before and after school, helps parents to work and can offer children great activities around the school day. The education and care provided in childcare settings up and down the country is pivotal for children. Visiting and talking to nurseries, childminders and other providers is one of the best parts of my job. I wish to put on record my thanks for the hard work and dedication of the talented people who work in the sector.

I have travelled across the country visiting providers: from Chestnuts Childcare in Shirebrook to Kids Inc in Crowthorne; from Little Stars in Peterborough to Imagination Childcare in Moredon; from Curious Caterpillars in Stroud to Playsteps Day Nursery in Swindon; and from Bright Horizons in Didcot to Acorn Day Nursery in Emberton. I thank my hon. Friends the Members for Peterborough (Paul Bristow), for Bolsover (Mark Fletcher), for Bracknell (James Sunderland), for North Swindon (Justin Tomlinson), for Stroud (Siobhan Baillie), for Milton Keynes North (Ben Everitt), for Cities of London and Westminster (Nickie Aiken) and others for hosting me on those visits. They all share my determination to get this right for parents and providers.

When I am out on those visits, I often hear how much of a lifeline the settings are for parents, allowing them to work and develop their own careers, while providing the high-quality early education that gives our youngest children the best start in life.

I support the ambitious expansion of childcare support for working parents that the Chancellor announced in his spring statement. It represents the single biggest investment in childcare this country has ever seen. It will make sure that parents are able to access the high-quality, affordable childcare that they need.

Today’s changes are just one part of our generally radical plans. By 2028, we expect to be spending more than £8 billion per year on early years education, which is double what we spend now. This will build on the 30 hours of funded childcare for three to four-year-olds that this Government introduced in 2017, extending the entitlement to eligible working parents of children aged from nine-months-old to when they start primary school. It will remove one of the largest hurdles that working parents face, and it will save parents £6,500 per year on average.

We have heard it loud and clear from the sector that getting the funding right is crucial. From this September, we will provide £204 million of extra funding for local authorities to increase the hourly rates that they pay providers, and we will make sure that rates continue to go up each year. That means that, from September, the average hourly rate for two-year-olds will go from £6 per hour to around £8 per hour, and the average rate for three to four-year-olds will be over £5.50 per hour. From 2024-25, the average rate for under-twos will be around £11 per hour. We will confirm the September rates for each local authority before the summer break. We will also ask the sector for its views on how we should distribute the funding for the new entitlements from April 2024, including the rules that local authorities will have to follow when distributing the funding to providers.

Of course, money is not everything. We also want to boost the early years workforce, who are so crucial to the success of nurseries across the country. There are multiple ways that we are doing that. I have heard from many people who manage nurseries that the way that we regulate staffing in settings is stopping providers from making the most effective use of their staff and giving their best people responsibilities that match their abilities.

Likewise, childminders and nurseries have been telling us about barriers to delivering the education and care that they want for children. That is why we have launched a consultation on proposed changes to the early years foundation stage requirements. Every single one of our proposals has come from conversations with people working in the sector. They will give settings more flexibility and help address some of those barriers, while maintaining high-quality provision and keeping our youngest children safe. Indeed, 96% of childcare providers in England were judged good or outstanding at their most recent inspection, which should give parents huge confidence in the standards of provision.

Some of the new measures will help free up staff to pursue professional development opportunities. We are investing up to £180 million in the early years education recovery programme, which offers a package of training, qualifications, expert guidance and targeted support for everyone working in the sector.

To train people up, we need to get more people in, so we are also going full steam ahead with a new national campaign early next year to promote the sector and support the recruitment and retention of talented staff. We will also consider how to introduce new accelerated apprenticeship and degree apprenticeship routes, so that new entrants can build careers at all levels of the sector.

I wish to reassure Members that we will work closely with the sector to deliver these historic reforms, just as we did on previous successful roll-outs of the 30 hours entitlement for three to four-year-olds, the 15 hours entitlement for two-year-olds from disadvantaged backgrounds, and the holiday activities and food programme. We cannot do this without early years providers, childminders and local authorities. We have a strong track record of working together to deliver childcare for parents, and I will be listening closely to them when considering our next steps.

Madam Deputy Speaker, I commend this statement to the House.

I thank the Minister for advanced sight of her statement.

The Government’s realisation of the importance of childcare remains striking, despite what the Minister says, for how long it has taken. Childcare is important for so many reasons—for giving every child the best start in life, for helping every parent to take on and succeed at the jobs they love, and for the foundation that it provides for success at school and throughout education. Above all, as my hon. Friend the shadow Secretary of State for Education has rightly said, childcare is important for supporting families to achieve and thrive together. Yet it is only now that the Government have arrived at the party. It is typical of this Government that they are not only late but focused on tweaks that they trumpet proudly but that do not deliver the scale of reform that is urgently needed.

The reforms reflect some of the changes to universal credit that the shadow Secretary of State for Work and Pensions has repeatedly called for. But, as he has also warned Ministers, they do not go far enough in giving people the chances and choices to go back to work at the scale necessary to tackle the challenges.

On childcare, the Government’s fixation on their broken hours model leaves them blind to the wider challenges around supply and demand of childcare and the extraordinary structure of the market for extra hours. The failure of that market is felt by every family. A decade of sticking-plaster politics from the Conservative party has caused them pain. But the announcement does nothing to ensure that childcare places are available in the cities, towns, and villages of our country. In some places, nursery and childcare spaces are outnumbered 10 to one by the children who need them.

I am delighted that the Minister has visited the seats of so many of her newest and presumably most nervous colleagues, but, as well as talking to parents who have found childcare, she would have done better had she spoken to parents who have not. The announcement does little to deliver the extra staff who will be needed to deliver the extra entitlements for parents that the Minister so enthusiastically announces. It does nothing to deliver the childcare places in which our children will be cared for and in which, we hope, they will learn in those extra hours and months of their lives. It is great to hear that the Minister will be listening to providers and local authorities, but listening is no substitute for action. It does little to retain or upskill the existing staff in the sector who are leaving in their droves for work that is more clearly valued. It does little to enrich childcare, to drive up quality, to make it a part of our education system, and to deliver a foundation for achievement and success right through school and life. It does little to deliver the flexibility that parents need not merely at work, but to get into work—to get the training and skills that they need and that our companies, communities and country need. In short, the announcement today is little more than a post-dated cheque. It is a promise of jam tomorrow—a promise that brings more questions than answers.

Madam Deputy Speaker, let me briefly set out a few questions in the hope that the Minister can address them in the debate today. When the 30-hours childcare entitlement is spread over a year, it is the equivalent of 22 hours a week. What steps is she taking, right now, to address the cliff-edge in costs between the Government-funded hours and the hours for which parents have to pay? Will she repeal the restrictions that councils face in making more childcare provision available? Is she genuinely confident that a new advertising campaign will be enough to attract workers to the sector? Is she aware that, for an increase in entitlements to childcare places to work, there must be more staff, and more settings, otherwise more parents will simply find that they cannot get the childcare that they need and to which they have entitlement? Finally, how does the Minister intend to ensure better uptake of childcare entitlements among eligible families given the complexity and bureaucracy of the existing system?

I thank the hon. Gentleman for his reply. Let me address some of the points that he raised in turn.

The hon. Gentleman talked about the ability of parents to look for childcare in the holidays. We have the £200 million holiday activities and food programme, which is particularly targeted at disadvantaged children. Last summer, more than 600,000 children accessed that. When we did our initial survey of that programme, about 70% of those children said that they had never been to anything like that before, which is a great sign of the opportunity that it is spreading. He talks about the work that we are doing with local authorities. To understand sufficiency and any challenges, we are contacting every single local authority as part of the roll-out.

The hon. Gentleman talked about getting more staff, and we have set out some flexibilities; I talked in my statement about the recruitment campaign we are doing next year. He talks about better uptake, but I would say that the uptake of the offer for three to four-year-olds is in the 90% range; for two-year-olds it is in the 72% range and tax-free childcare in recent years has gone from 172,000 up to 500,000. Yes, there is more to do, but we have very good uptake and any parent thinking about more childcare should look at our Childcare Choices website to see what they might be entitled to.

Overall, however, I get the sense from the hon. Gentleman’s comments that he did not listen to my statement. I talked about the £4 billion extra that is going into the sector, about plans for staff and for childminders and about routes for apprenticeships. I remind him that it was a Conservative Government that expanded the offer for three to four-year-olds and introduced the offer for two-year-olds, and now it is the Conservative Government making the single largest-ever investment into childcare.

What do we know about the Labour party policy? We know the Opposition wanted to do universal childcare, but they denied that last week. That was last week’s flip-flop—or I should say one of last week’s flip-flops. They have talked about means-testing childcare, which would mean taking away childcare from middle-class parents at a moment when we know that families are struggling with their finances. On the Government side we recognise that childcare is important for families and important for growth. Our childcare plans, as announced at the Budget, were called by the International Monetary Fund a serious point of growth in this country. We recognise that that is important.

I congratulate my hon. Friend on this important statement. I agree with her and, more importantly, I agree with the Treasury that childcare is worth investing in. I welcome the changes to universal credit, which I think will make a significant difference, but I particularly welcome the £204 million of extra funding for local authorities to distribute to providers; from what the Select Committee has heard from providers, that is urgently needed. We need to make sure we have capacity in the system to meet the challenge of providing all that additional childcare for families. I urge her to make sure that as much of that funding as possible is distributed, and to talk to local authorities about ensuring they do not top-slice it too aggressively. When the Government announced the £8 and £11 rates for the younger years, we heard from childminders in particular that they simply did not believe that they would receive that. We want a system in which the providers on the frontline of providing childcare get the funding that the Government announce.

We have a rule at the moment that local authorities have to pass on 95% of the funds that they receive, and our returns show that they pass on 97%. However, as the years go on, with the amount of extra money that we have put into the system, we can definitely look at those figures and at what can be done. Some of that will be set out in our consultation before the summer.

The Minister told us about several childcare providers that she has spoken to, but she has clearly not spoken to Munchkins Village Nursery in Burscough in my constituency. The nursery got in touch with me to say that, while the help for parents is very welcome, the Government have by their own admission underfunded the sector to the tune of about one third of the funding promised—about £2 billion—and the nursery staff believe that the sector is in financial risk. Does the Minister appreciate that, regardless of any funding for parents, they simply cannot find the childcare that they need?

I recognise that it has been a challenging few years for the sector. In this piece of work we have surveyed about 10,000 providers, we have a providers’ finance report and we have surveyed about 6,000 parents, so we used a very data-driven estimate to come up with the figure. We will be consulting on the funding before the summer and, as I said, there will be funding coming in September before any expansion of the entitlements, which start in April next year. There will be additional money next year and by 2027-28 we will be spending an additional £4 billion that will be distributed via local authorities to those settings.

I congratulate my hon. Friend on such an excellent statement today—I think the shadow Minister needs to read it, because he clearly did not listen to it.

My hon. Friend has clearly thought about the need for top-quality childcare, which for many young children is vital when their home life is perhaps not all it could be. One thing she has not talked much about is the provision of new workforce. Can she comment a bit more on her consultation on changing the requirement for high-level qualifications to a requirement for qualifications that are more appropriate to providing empathetic and supportive care?

I know my right hon. Friend is incredibly passionate about this area, and I share her passion. In the consultation we have set out some flexibilities after talking to the sector; an example of that would be relaxing some of the requirements around having level 2 maths for level 3 qualifications, which we know has been a barrier for some people. We are looking at all kinds of flexibilities that mean we will get the right staff at every stage to make sure that our children get the right education.

The Minister would have been very welcome in the north of England, particularly in Westmorland. This announcement is welcome in many ways and will help many parents in my constituency who cannot afford to work at the moment. It is a good step forward. However, many childcare providers—probably the majority in my constituency—are linked to the primary school in that community, and primary schools have never faced such awful financial circumstances as they do now. I have visited many schools in Westmorland the last few weeks, from Appleby to Windermere, from Kendal to Brough, from Shap to Witherslack and many others. They all tell me that the deserved pay rises for teachers and other staff are unfunded by Government and that energy costs, which they have seen go through the roof, are also largely unfunded, leaving many schools in deficit and having to shed staff. All that undermines their ability to provide childcare and other forms of education. What has the Minister to say to our local schools in Westmorland, which are desperate for her support so that they can carry on providing education and childcare?

We are taking schools funding to a historic real-terms high. We are also making the single largest ever investment in childcare. I recognise that it has been a difficult time for public sector services, and the most important thing we can do is to grip inflation and make the pound go further, but overall we are putting record funding into both areas.

We do need more childcare, and I wish the Minister every success with these policies, but we are going to need a lot more people, businesses and other institutions to come forward to provide that care. Will the whole Government do more? Can we get rid of IR35, a tax on the self-employed? Can we raise the value added tax threshold for small business? We must look at making childcare more worthwhile, because we need the teachers and the childcarers.

I thank my right hon. Friend—I have just had a bit of a flashback to my days as a Treasury Parliamentary Private Secretary. He is absolutely right that the supply of childcare will be a really important part of growth, as has been reiterated by the IMF and others.

Progress in this area is very welcome and necessary, but parts of the statement will be dispiriting for families in Northern Ireland, as we fall even further behind. Can the Minister confirm that Northern Ireland will receive commensurate funding through the Barnett formula, and have she and her officials given any thought to how the new regulations and resources might be applied in Northern Ireland? Furthermore, given the extremely austere budget settlement in Northern Ireland, does she acknowledge that even where there are improvements in childcare, many children will be going on to increasingly degraded and under-resourced primary schools?

The money will be passed on in the normal way across the education budget. We regularly meet Education Ministers from the devolved Administrations, and the Secretary of State held such a meeting, I think from memory, in early June.

An excellent statement—on behalf of nurseries in Winchester and Chandler’s Ford, I thank the Minister. The recruitment drive in particular is much needed. However, it would be easier to do that, and to retain staff, if we could give staff a pay rise. The sector tells my all-party parliamentary group on childcare and early education—I thank the Minister for coming to address us—that if it were not paying business rates, that would be a lot easier. School-based settings do not pay them, but the rest of the private, voluntary and independent sector does. I realise that that is a matter for Treasury, but will she please take that away and look at it again? That would make a her a true hero in the sector when she continues her very welcome visits.

I will of course look at everything we can do to support all settings. As part of the work we did to assess costs, we looked at other costs, including things such as business rates, to assess the level of funding we should give for the hourly rates, but of course I will always look at anything I can do to support nurseries.

Looking at the existing childcare entitlements for two, three and four year olds, the Early Years Alliance and the Women’s Budget Group estimate that the current offer falls short by about £1.8 billion—and that is even before we expand the offer, as was announced in the spring Budget. The Government are providing only an extra £204 million this year and £288 million next year, before we expand the hours. That clearly falls well short. There is no point expanding the hours if the providers are not there, so could the Minister explain what she is doing to ensure that early years providers actually remain financially viable?

As I said, it has been a challenging time for providers, but the work we have done to come up with the hourly rate has been based on a lot of evidence. I do not recognise that figures that the hon. Lady talks about. As I said, we surveyed 10,000 providers and 6,000 parents, and looked at providers’ finance reports, to look deeply at the costs and come up with the hourly rate. I continue to talk to all providers as we continue the expansion.

It is a tribute to the Minister that she secured the single largest ever increase in funding in this important area and that the Labour Opposition could not even be bothered to turn up today. She will know at first hand from visiting Imagination nursery, which is now an outstanding provider, that it has the sort of provision that we want to expand. For it to have the confidence to do so, it needs certainty on funding to recruit and retain staff and secure additional premises. Will she keep pushing for as much advance clarity and certainty as possible so that all children can benefit from this wonderful announcement?

I absolutely will. It was a joy and a delight to visit Imagination nursery, which does outstanding work, and I congratulate it on its recent grade. I will take my hon. Friend’s point on board.

This is the first time in history that a Prime Minister and Chancellor of the Exchequer have put the early years at the centre of the country’s growth strategy. I note that an International Monetary Fund analyst singled it out in saying that

“supply-side measures, notably the increase in childcare support…should have a positive effect on medium-term growth”,

so that is absolutely welcome.

I cannot thank the Minister enough for visiting BarBar Nursery, Allsorts, and Curious Caterpillars Day Nursery. In our work with Onward, we have called for a national campaign on recruitment. If there is any possibility of that happening this year rather than next, I would like a commitment from the Department that it will get a wriggle on, because that is important.

Will the Minister work with the Local Government Association to have a good look at what different councils are doing, not only with the money flowing down from Government but on how often childminders are paid? I know of childminders who are paid only about three times a year. Not many of us could cope with that type of cashflow.

As always, my hon. Friend makes excellent points on this matter. I will absolutely consider her point about childminders and will ensure that I continue to talk to her. She has been incredibly helpful throughout this process and in securing the funding.

I warmly welcome my hon. Friend’s statement, which will help some of those on the lowest incomes either to take up work or to take on more work. She will recall that when I had the pleasure of taking her to a nursey in Didcot, it raised the varying rates that nurseries are paid by local authorities across the country for the same work. Does she agree that, although the Government’s largest single investment in childcare ever is welcome, it is important that local authorities pay a broadly comparable amount of money to providers?

I am grateful to my hon. Friend for taking to me to Bright Horizons in Didcot, which was a useful visit. Local authorities have different rates. We will set out funding rates before the summer, and will consult on them. We take different costs across the country into account, but he makes an interesting point.

I warmly welcome the Minister’s announcement and thank her for all the work that she has done for childcare providers. I was going to raise the point made by my hon. Friend the Member for Winchester (Steve Brine) about business rates. Will the Minister explain what help she is giving to local authorities to help providers deliver the expanded childcare offer to parents?

At the moment, the way the policy works is that providers have to pass on at least 95%, and can keep 5%, of the funding rates that they are given. Most pass on more—from our returns, most pass on 97%—but they can use the additional money for the administration of payments and such.

May I congratulate my hon. Friend on her statement and on the hard work she has put in to get us here? I held a roundtable of early years providers in Barrow a few weeks ago. The issue that came up time and again was that they are losing good staff—staff the kids like and the parents get on with—because of the qualifications requirements for English and maths. Can the Minister confirm whether part of the consultation will look at that? May I invite her to come and visit Cheeky Monkeys Childcare and some of the other providers in Barrow at some point in the future?

My hon. Friend is absolutely right. That was one of the things that I heard from the sector as well, particularly on the qualification barriers. I can confirm that we are consulting on that—particularly on the maths point—in the flexibilities consultation that we set out at the beginning of the summer. I would be delighted to visit him.