Finance (No. 3) Bill

Once again, Mr Evans, I welcome you and look forward to your time in the Chair as we debate clause 35 of the Finance Bill. You will of course be aware that we tabled an amendment to the clause that you have chosen not to select, which is your prerogative; we are relaxed about that. However, it is important that we test and discuss the issues in the clause with Ministers to examine its impact, as well as the impact of other changes that form part of this package of measures. Our concerns centre on the effects of the various changes that have been made to child care support. Clause 35 introduces changes to the higher rate taxpayer relief for child care—an issue that caused some discussion in the last months of the previous Labour Government and will undoubtedly cause further discussion today. We need to look at the clause not only in its own context but in the light of wider taxation and benefit policies that the Government are progressing. This is part of a number of measures that will address a range of issues to do with child care and families generally. I also want to consider some of the technical matters that outside groups have raised with me and with other hon. Members regarding the wording of the clause and, if I may slightly stray outside the scope of the debate, the wording of schedule 8, which is related to it and to which we will return in Committee in due course. The background to clause 35 will be familiar to my right hon. Friend the Member for Edinburgh South West (Mr Darling) because it had its genesis in discussions that took place as part of the previous Labour Government's proposals. Members will be aware that in 2009 my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Prime Minister, announced to the Labour party conference proposals that he brought before the House later that year regarding child care relief and basic rate relief. In government, Labour's plan was to use the savings from limiting child care relief to basic rate relief to fund an expansion of child care places for two-year-olds in England, with potential consequential reliefs and amendments for Wales, Scotland and Northern Ireland. There was some controversy and discussion on those matters. The Exchequer Secretary will be aware that there was extensive discussion in the Labour Government about those matters, and that under the leadership of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath, they settled on limiting child care relief to basic rate relief, with the purpose of funding an expansion of child care places for two-year-olds. I would like clarification from the Exchequer Secretary today on—[Interruption.] Don't worry, I am still here. The hon. Member for Crewe and Nantwich (Mr Timpson) will know that one picks up the occasional sedentary remark. Unless I reflect back on the last remark, it will not appear in Hansard, and on this occasion, I will not reflect back on it. As can be seen, Government Members have expressed an interest in my speech. The Government have made changes to the Labour Government's proposals on basic rate relief and the expansion of child care places for two-year-olds. Indeed, the Government's proposals are markedly different on the child care element, to which the relief is linked. The Labour Government had planned some 250,000 child care places for two-year-olds from low-income families, although I accept that that was scaled down to about 65,000 child care places. The Government proposals before the Committee will increase from 10 to 15 the hours for the pilot of child care places for 28,000 children. There is a significant expenditure saving in clause 35, compared with the Labour Government proposals. I think that it is worth focusing on those issues today, because if the scope of the discussion that I have given is accepted, this measure cannot be divorced from the reasons why the Labour Government intended to undertake the purpose of clause 35 and what the current Government are now doing with that resource. From January this year, value added tax will cost families with children an extra £450 a year on average. That is one of a range of measures on the table that will press hard on the ability of individuals to provide child care at affordable levels. The Government are pressing ahead with the change that my right hon. Friend the Member for Kirkcaldy and Cowdenbeath proposed in government to pay for the trebling of the number of free child care places available to the most deprived two-year-olds. We accept that the relief, which is manifested in clause 35, was badly targeted. That is why we made those changes in government, and our proposal would have paid for more of the poorest in our society to have child care. I want the Exchequer Secretary to explain how the resultant savings from the proposals will be invested to support issues such as child care for people in our community. At the same time, the Government are hitting family finances in other ways, such as through child tax credits and through child benefit being frozen, and indeed being cut for many people in the years ahead. The families who will be affected by this measure will soon be affected by other measures, particularly that on child benefit. The taxation changes in clause 35 need to be seen in the light of the decision to withdraw child benefit from April 2013 from households containing at least one higher rate taxpayer.