Date: 01 October 2014
Reference: NIA 189/11-15
ISBN: Only available online
Background to the Bill
1. The Childcare Payments Bill was introduced in the House of Commons on 5 June 2014 by Mr George Osborne, Chancellor of the Exchequer and had its second reading on 14 July 2014. The Bill has now been sent to the Public Bill Committee, which is expected to report to the House on 28 October 2014.
2. The Bill introduces a new tax-free childcare scheme to support eligible parents with childcare costs. Proposals relating to tax-free childcare were the subject of a Treasury consultation in August 2013, and OFMDFM submitted a response to that consultation. However, the Committee first became aware of the proposals at its meeting on 11 June when Members considered correspondence from the Department providing advance notice of its intention to lay a Legislative Consent Memorandum in relation to the Childcare Payments Bill.
3. Under the proposed scheme the Government would provide 20% support on costs up to £10,000 per year for each child via an online account. In practice the Government would top up any payments made into the account, capped at a maximum Government contribution of £2,000 a year for each child. Unlike the current Childcare Voucher scheme, those who are self-employed will be eligible for support under the tax-free childcare proposals.
4. Those claiming tax-free childcare will be required to meet a number of eligibility criteria including:
i. They must be 16 or over;
ii. They must be responsible for the child;
iii. They must be in the UK;
iv. They and their partner must be in qualifying paid work (the self-employed are included). They must be earning more than a certain minimum - likely to be set at 8 hours at the national minimum wage;
v. Their incomes must not exceed a certain limit (£150,000 pa);
vi. They must not be claiming universal credit;
vii. They must not be in a relevant childcare scheme;
viii. They must not be receiving other childcare support.
Purpose of the Legislative Consent Motion
5. The laying of the Legislative Consent Motion is in relation to Clause 67 of the Bill which amends Schedule 2 (excepted matters) to the Northern Ireland Act 1998 to include the “operation of the Childcare Payments Act 2014”; while Clause 73 extends the provisions of the Bill to Northern Ireland.
6. In general, matters dealt with by HMRC apply on a UK-wide basis and are excepted matters under the 1998 Act. However, as the current childcare scheme is neither a tax nor a duty, it is a transferred matter in relation to Northern Ireland. As the proposed scheme will be administered by HMRC and financed centrally by the UK Government, it is considered appropriate that the scheme should operate on a UK–wide basis and its operation made an excepted matter. The scheme will apply uniformly across all UK jurisdictions and the power to change, for instance, eligibility and entitlement criteria or the amount of Government top-up payments to parents, will rest solely with the UK Government.
7. The full text of the Legislative Consent Memorandum is available at Appendix 1.
8. At its meeting on 25 June the Committee considered correspondence from the Committee for Finance and Personnel (CFP) which had received a request from Employers for Childcare to brief that Committee on the Childcare Payments Bill. As the matter would fall to the OFMDFM Committee for scrutiny the CFP deemed it appropriate to pass this request on. At its meeting on 25 June the OFMDFM Committee agreed to invite Employers for Childcare to brief Members at its meeting on 2 July.
9. The Committee considered the Legislative Consent Memorandum at its meeting on 2 July 2014, including an Assembly Research paper which is available at Appendix 2.
10. Representatives of Employers for Childcare briefed Members at this meeting and raised a number of questions with regard to the legislation including:
- The potential impact for parents employed through zero hours contracts;
- The potential impact for families where one parent becomes unemployed during an eligible period;
- Apparent lack of support for those in training or education;
- Lack of clarity regarding the position of Northern Ireland with regard to the introduction of Universal Credit;
- Concerns that a ‘qualifying child’ will be a child aged under 12, when currently support is provided until the 1st September after the child’s 15th birthday;
- The potential for users of the scheme to be charged fees
The briefing paper from Employers for Childcare and a further submission received on Monday 8 September are available at Appendix 3. The Official Report of the evidence session is available here.
11. The Committee also took evidence from Departmental officials Mr Martin Tyrell and Dr David McGowan at its meeting on 2 July 2014. Officials gave a brief overview and explained to Members the need for a Legislative Consent Motion. Officials also responded to some of the concerns raised by Employers for Childcare in the preceding briefing. The Official Report of the evidence session is available here.
12. During the briefing, officials agreed to provide further information on a number of issues including:
- The Department’s response to the 2013 Treasury consultation on tax-free childcare;
- A list of stakeholders who were consulted by the Department on the 2013 Treasury consultation on tax-free childcare; the number of responses; including copies of the responses; and
- An assessment of the impact the proposed legislation may have on parents who are on zero hours contracts.
The Committee also asked the Department to provide comment on the issues raised by Employers for Childcare; and on Clause 30 of the Bill which refers to Universal Credit and, as drafted, appears to expect that the Universal Credit will be in operation in Northern Ireland by the time these proposals are implemented.
13. OFMDFM wrote to the Committee on 5 August 2014 addressing the issues raised in the briefing paper provided by Employers for Childcare. The Departmental response is available at Appendix 5.
14. OFMDFM wrote to the Committee again on 8 September expressing its regret that the Committee had not been notified about the HM Treasury/HMRC consultation in autumn 2013, and of the Department’s response to that consultation. The Department also provided:
- a copy of the comments sent to HMRC in October 2013 on the initial consultation;
- a list of stakeholders contacted by OFMDFM;
- a list of all respondents to the HM Treasury/HMRC consultation; and
- a copy of the two local consultation responses received by OFMDFM.
A copy of this correspondence is also available at Appendix 5.
15. Following the evidence sessions on 2 July the Committee agreed to forward the Employers for Childcare briefing paper to the Committee for Employment and Learning for information. In response, on 10 September 2014, that Committee forwarded correspondence from the Department for Employment and Learning (DEL) which provided comment on the Employers for Childcare policy paper. DEL advised that “the Bill should create an improved level of available support, which will be welcome as childcare is a significant barrier to many people’s participation in the labour market”. The Department went on to advise that the “proposed approach would complement its existing provision, which offers financial assistance towards the cost of childcare incurred by certain eligible participants while on its programmes”. A copy of this correspondence is available at Appendix 6.
16. At the meeting on 10 September 2014 Members agreed to postpone consideration of the report on the Legislative Consent Motion for one week, and agreed to invite the relevant officials to appear before the Committee on 17 September 2014 to respond to queries.
17. Prior to the Committee meeting on 17 September the Chair, Deputy Chair and some other Members met informally with Employers for Childcare who again presented their concerns regarding the proposed legislation. Whilst Employers for Childcare acknowledged that a number of parents would benefit from the proposed tax-free childcare scheme, they remained concerned that some parents would lose out under the new arrangements. For example, the current scheme is open to parents with children up to the age of 16, while the new scheme is only open to parents with children up to the age of 12. Employers for Childcare presented Members with options for supporting parents who may be disadvantaged under the new scheme, and this paper is available at Appendix 4c.
18. The Committee again considered the LCM at its meeting of 17 September, and noted that a technical consultation relating to aspects of the proposed legislation was being undertaken by HMRC (Appendix 5c). Departmental officials appeared before the Committee to address the questions and concerns of Members. Of particular concern to some Members was how the needs of those parents who may be disadvantaged under the new scheme would be addressed. Officials advised that options in this regard would be considered in the development of the Department’s full childcare strategy. The Committee also considered correspondence from the Irish Congress of Trade Unions which urged the Assembly to devise a local solution to the issues presented by the proposed legislation. This correspondence is available at Appendix 7. The Official Report of the briefing is available here.
19. Following the briefing the Committee agreed to request further information on the current uptake of the Childcare Voucher Scheme, including: an assessment of the number of parents who may be worse off under the new proposed arrangements; the number of parent with children aged 12 years to 16 years who currently avail of the Childcare Voucher Scheme; and any further thinking on what additional protections can be put in place for those who may be disadvantaged by the new proposed scheme as part of a wider childcare strategy. The Committee also agreed to forward the ICTU correspondence to the Department.
20. Members also agreed to seek an urgent meeting with Ministers regarding the Committee’s concerns about the impact of the Childcare Payments Bill, and whether any further thinking had been given to additional protections that may be put in place within a wider Childcare Strategy for those who may be disadvantaged by the new scheme.
21. Members agreed to consider its report on the Legislative Consent Motion again at its meeting on 1 October, in advance of the LCM being tabled by the OFMDFM for debate in plenary.
22. A delegation from the Committee met with junior Minister Bell and junior Minister McCann on Monday 29 September. Members heard that the current voucher scheme is complicated and take up is low, with only one in ten of those eligible drawing down childcare vouchers. While Members were advised that it is not possible at this time to quantify how many will benefit or otherwise from the new scheme, it will be available to parents who cannot avail of the current voucher scheme. It was highlighted by junior Ministers that all entrants to the new scheme will be on an equal footing with regard to tax relief, whereas one of the groups that is better off in the current scheme are those in the higher tax bracket. The junior Ministers also advised that figures regarding the number of parents with children aged 12-16 receiving vouchers through the current scheme are not available; however, it was accepted that this age group will need to be specifically considered within the wider childcare strategy.
23. At its meeting on 1 October, the Committee considered correspondence from the Federation of Small Businesses and the CBI. Both advised that the closure of the Childcare Voucher Scheme to new entrants will also affect employers who benefit from savings from the current scheme, and asked that additional support is considered for both businesses and employees who will be affected as a result of the changes. The Committee also noted additional information from Employers for Childcare.
24. The Committee recognises that, should the provisions in the Childcare Payments Bill not be extended to Northern Ireland, families will lose out on support with childcare costs when the current scheme closes to new entrants. In addition, a number of parents who had been excluded from previous schemes (e.g. those who are self-employed) will now be able to take advantage of relief for childcare costs. The Committee therefore agreed at its meeting on 1 October to support the Legislative Consent Motion to extend the provision of the Childcare Payments Bill to Northern Ireland. However, the Committee strongly recommends that the Department undertakes a scoping exercise to identify the categories of people who will be disadvantaged under the new scheme and, where appropriate, ensures that their needs are addressed within the wider childcare strategy.
1. Legislative Consent Memorandum
2. Assembly Research Paper
3. Correspondence from Committee for Finance and Personnel - June 2014
4a. Employers for Childcare Briefing Paper - July 2014
4b. Employers for Childcare - further correspondence 8 September 2014
4c. Employers for Childcare options paper - 17 September 2014
4d. Employers for Childcare - additional information - 29 September 2014
5a. OFMDFM response to Employers for Childcare Briefing Paper - August 2014
5b. OFMDFM response to other Committee queries - September 2014
5c. OFMDFM notification regarding technical consultation - September 2014
6. Committee for Employment and Learning correspondence - September 2014
7a. ICTU correspondence - September 2014
7b. FSB correspondence - September 2014
7c. CBI correspondence - September 2014
Minutes of Evidence
Minutes of Proceedings
The Committee discussed matters relating to the Legislative Consent Motion on the Childcare Payments Bill at the following meetings: