Her Majesty’s Revenue and Customs (Nurseries)

Michael McCann Excerpts

Monday 15th October 2012 Commons Chamber

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

I applied for this debate before Parliament adjourned for the conference recess, and my application was triggered by the decision by Her Majesty’s Revenue and Customs to close eight in-house nurseries on its estate, without any debate, consultation or negotiation. Things have moved on significantly during the intervening period, but many old and new questions remain unanswered so this debate remains pertinent and necessary.

I know that the Minister is committed to child care. On 17 October 2011, he told the House that the Government’s strategy on child care and work involved

“encouraging parents into work by promoting safe, good quality child care and providing incentives and wider options to encourage more employers to support child care provisions for their staff.”—[Official Report, 17 October 2011; Vol. 533, c. 686W.]

I fear, however, that the Government’s commitment has not cascaded down to senior civil servants in HMRC, and I will explain why by providing a whistle-stop tour of events.

In late August, HMRC advised that it had unilaterally decided to close eight nurseries that were part of a relationship between HMRC, Mapeley Estates Ltd, which owns some of the HMRC estate, and Bright Horizons, the actual nursery provider. As hon. Members will understand, my immediate concern was for the welfare of the 86 families whose children attended the custom-built nursery inside HMRC East Kilbride in my constituency. In my mind’s eye, I imagined that HMRC would have done its homework, and that I would be presented with incontrovertible evidence that the nursery was grossly inefficient, or that the number of children using the facility was too low to sustain in-house provision.

It was, therefore, with some trepidation that I wrote to HMRC to find out its reasons for the proposed closures. I received a response from Mr Mike Falvey, the chief people officer at HMRC, who—for reasons that will become obvious—probably holds the most inappropriate job title in the civil service. In his letter dated 5 September, Mr Falvey explained that the current contract between Bright Horizons and Mapeley originally ran for five years, but had been extended twice and could not be extended again. He advised that a further contract needed to be retendered, which HMRC had chosen not to do.

[Jonathan Evans (Cardiff North) (Con)]

I congratulate the hon. Gentleman on securing this debate. Early in the process he describes, he and I discussed this matter, primarily because my constituents were also affected and were involved in some of the changes. Does the hon. Gentleman think that the period of notice given was truly appalling—three months to locate young children elsewhere—and that inadequate thought was given by HMRC about how it should try to help a commercial solution?

[Mr McCann]

I agree entirely with the hon. Gentleman, and I think he will be even more appalled as I continue with my remarks. Not only did Mr Falvey advise that a future contract needed to be re-tendered—something HMRC had chosen not to do—he further advised that there were only eight nurseries for more than 300 HMRC offices, and that HMRC did not provide the same child care service for all staff. Finally, he advised that the number of parents using the nurseries was declining and, most importantly, that only a third of spaces were taken by children of HMRC staff.

There was only one problem: none of that information—provided by a civil servant who is paid more than the Prime Minister—was accurate. I found out several weeks later that the deal between Mapeley and Bright Horizons—the hon. Gentleman might want to listen carefully to this point—contained a provision for an extension of an additional year, to November 2013, which was never disclosed to me by civil servants. I also found out that, even if the eight in-house nurseries run by Bright Horizons were closed by HMRC, it would still have in-house nurseries, including a large one in the constituency of my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown). Finally—I consider this to be the pièce de résistance—I found out that 63 of the 86 children at the nursery in my constituency were the children of HMRC staff.

[Lilian Greenwood (Nottingham South) (Lab)]

My hon. Friend sets out a powerful case. I understand that the nursery at Castle Meadow in my constituency currently has a 76% occupancy rate, that more than half of its users are HMRC staff, and that its outdoor play area has only recently been upgraded. Does he agree that that calls into question the account hon. Members have been given of a service in decline?

[Mr McCann]

My hon. Friend is absolutely correct. It also calls into question the decision taken—the account I was given was riddled with similar inaccuracies.

Armed with the knowledge that the HMRC rationale for the closure in my constituency was fallacious, I called Mr Falvey and explained that the arguments he had presented were plain wrong. I asked whether, in the light of reality, he would agree to my modest request to review the decision in full or in part. The chief people officer refused point blank to do so. To digress ever so slightly, it is not difficult to see why HMRC came 36th out of 37 Government Departments last year in the industrial relations league table. Perhaps it is going for 37th place this year.

After that setback, I contacted the Minister’s office to arrange to discuss the matter, feeling strongly that senior civil servants could not dismiss the concerns of elected Members of Parliament in such a shoddy manner, particularly as their decision to shut the nurseries was obviously based in full or in part on erroneous information. Alas, the Minister refused to meet me, claiming that the issue I wanted to discuss was operational. No further explanation was provided by his private office.

When hon. Members are running out of cards to play, politics can be frustrating. However, if you do not mind an “It’s a Knockout” analogy, Mr Speaker, I played my joker and applied for an Adjournment debate just before hon. Members packed up and left for the recess. Whatever gods exist, be they mortal or otherwise, my debate topic was picked for this evening. However, I did not want to wait until this evening—I wanted a resolution—and had a duty to look after my constituents and their children, so I once again pressed HMRC and set up a call with Lin Homer, chief executive of HMRC. Miss Homer was previously chief executive of the UK Border Agency and permanent secretary at the Department for Transport, where she worked on the west coast main line contract.

I spent 45 minutes on the telephone with Miss Homer on 21 September, only to find that the reason HMRC wanted to close nurseries had nothing to do with the reasons set out in Mr Falvey’s 5 September letter. I was advised for the first time that the decision was being made to rationalise the HMRC estate to save money on rent.

[Greg Mulholland (Leeds North West) (LD)]

I thank the hon. Gentleman for giving way, for co-ordinating the letter and for showing leadership. Does he agree that one strange thing with regard to the estate is that the buildings will remain empty? That is another reason why the closures need to be looked at again, and why there should be a moratorium on them until we get the real facts so we can make a proper decision.

[Mr McCann]

I agree entirely with the hon. Gentleman— I shall expand on that in a moment.

I was advised for the first time that the decision to rationalise the HMRC estate was based on saving money on rent. Despite my reasonable request for a review and my suggestion on how to keep the nurseries open under new arrangements, Miss Homer confirmed that the closures would go ahead regardless.

The new information did not make any difference to the nursery in my constituency and others, as hon. Members have said. I shall suspend disbelief to explain why. The nursery contract is between Mapeley Estates and Bright Horizons. HMRC provides the space for free as part of its now-defunct commitment to family-friendly policies. It planned to shut the nursery in my constituency and leave 86 families—63 of them HMRC families—searching for new child care provision. What was to happen to the vacant space in East Kilbride, on which the taxpayer would continue to pay rent? Absolutely nothing. HMRC would continue to pay the full rent to Mapeley until at least 2015, the only difference being that a wonderful, fully equipped, custom-built nursery would lie empty, gathering cobwebs. Mr Speaker, you could not make it up.

In view of the new information, I made a further request to meet the Minister, and this time my request was granted. Lo and behold, a decision has now been made to keep the nursery in my constituency, and another in Cardiff, open.

[Jonathan Ashworth (Leicester South) (Lab)]

I pay tribute to my hon. Friend’s tenacity in pursuing this issue and I am, of course, delighted that the nurseries in East Kilbride and Cardiff will remain open. But the one in Leicester’s Saxon house will not remain open, even though it is oversubscribed and there are 15 staff on maternity leave who will want to use the nursery when they return to work. Does he agree with the hon. Member for Leeds North West (Greg Mulholland) that the Minister should announce a moratorium on these closures, otherwise children will face upheaval and staff will be made redundant?

--- Later in debate ---

[Mr McCann]

I agree entirely, and the rest of my contribution will explain why that is something that the Minister should actively consider.

The decision to keep two nurseries open was confirmed to me when I met the Minister and chief executive on 3 October. I have some remaining issues that I wish the Minister to address. The first is the package offered by HMRC to keep East Kilbride and Cardiff open. It is based on my original proposition to Lin Homer, offered on 21 September, that the accommodation could and should be utilised as a nursery until at least 2015, under new arrangements. However, that offer was made in ignorance of the knowledge that a clause already existed that would enable the eight nurseries to remain open for a further year, to November 2013. I therefore make a formal request to the Minister this evening to review the package offered on the grounds that his civil servants apparently did not know that the clause to extend the lease existed. This new information should allow all the nurseries to operate for a further year on the current terms and conditions.

My second request to the Minister relates to the behaviour of his senior civil servants. On 5 September, for different reasons, I asked the Minister of State in the Cabinet Office, at Cabinet Office questions, for a review of the civil service code. The Minister of State advised that the Minister for the Cabinet Office and Paymaster General had recently issued the first steps in the civil service reform programme, which sought to enlarge the area of accountability for senior civil servants. Mike Falvey, HMRC’s chief people officer, provided me with false information about why HMRC proposed to shut the eight nurseries. HMRC has denied that it had knowledge of the clause between Mapeley and Bright Horizons to extend the life of all eight nurseries for a further year, although that denial fits uneasily with the chronological order of events, which would have us believe that Bright Horizons attended a meeting in May 2012, was told that the nurseries would be shut in November 2012, and nobody mentioned the extension clause. I find that difficult to believe.

In any event, the chief executive presided over this debacle until 3 October, when there was a damascene-like change of heart, curiously coinciding with my meeting that day with the Minister. Does the Minister deem the actions of his civil servants to be incompetence or an attempt to mislead a Member or Members of Parliament? If it is incompetence, what is the Minister going to do about it? If it was an attempt to mislead, what is he going to do about it? I represented civil servants of all ranks as a full-time trade union official for most of my working life. Had a junior civil servant shown the same degree of incompetence or provided false information to a senior civil servant, they could have expected the sharp end of a capability or disciplinary process and, more often than not in my experience, that would have led to dismissal. Senior civil servants cannot be insulated or protected from the consequences of their behaviour. People expect their parliamentarians, acting on their behalf, to be given accurate information by Departments when it is requested, especially about decisions that have been made.

This debacle was presided over by two of the Minister’s most senior civil servants, and I have concluded that had it not been for the backing of the Public and Commercial Services Union, which represents HMRC staff, and the campaign in my area led by the families and children to keep their nursery open, and—I am utterly convinced—had this Adjournment debate not taken place, given its ability to shed light on the fundamentally flawed process that HMRC has followed, the nurseries thus far reprieved would not have been reprieved.

It is necessary that all the nurseries involved now be given the same reprieve. I am most grateful, therefore, that the procedures of the House of Commons have come to the rescue, and so too are the 86 families in my constituency. That said, those same 86 families, and countless others, were left in limbo, worried and put under tremendous stress over their children’s future child care arrangements. That matter cannot be swept under the carpet, so I hope and expect that the Minister will answer the direct questions that I have put to him.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

I start by congratulating the hon. Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) on securing this debate and acknowledging his efforts to pursue this issue on behalf of his constituents. I know of the equally determined efforts of my hon. Friend the Member for Cardiff North (Jonathan Evans) to represent his constituents, and I also acknowledge the other hon. Members who contributed this evening.

As we are all aware, HMRC’s core purpose is to collect tax and distribute benefits. That is what it was set up to do and where its efforts and resources need to go. Of course, it also has a duty to be a responsible employer to its staff, and I appreciate that the decision to close eight on-site nurseries has been controversial, but this provides an example of the difficult balance that public services often need to strike between their public obligations and their responsibilities to their own staff.

As alluded to by the hon. Member for East Kilbride, Strathaven and Lesmahagow, I am not responsible for the day-to-day management decisions of HMRC, which is a non-ministerial Department, but I am the Minister to whom it is accountable for its core duties, which is why I am responding tonight. For the record, I think that HMRC’s management decision was broadly the right one, although I agree that its execution of that decision could have been better handled and has caused regrettable upset and uncertainty among the parents of the children in the eight nurseries.

The hon. Member for East Kilbride, Strathaven and Lesmahagow, my hon. Friend the Member for Cardiff North and other hon. Members have made several important points, and I will deal with them, but it is important to understand why HMRC made the decision it made. As I understand it, the on-site nurseries were originally set up in a small number of locations where Her Majesty’s Customs and Excise and the Inland Revenue were experiencing recruitment difficulties among younger workers. The nurseries helped them to attract and retain parents of young children, at a time when there was no other provision for child care in HMRC’s legacy organisations.

Over the years, the number of these nurseries has declined, and across the eight nurseries that we are discussing, which are run by the private nursery provider, Bright Horizons, there has been a decline in both the take-up of places overall and in the proportion of places used by HMRC staff—I shall return to that point later. In fact, across all eight nurseries, only just over one third of places are currently taken up by HMRC employees. I recognise, however, that this was not the case in East Kilbride and Cardiff, where more than half the spaces were taken up by the children of HMRC staff, as was also the case with the Nottingham site.

HMRC made an operational decision, however, to end and not re-tender the contract for these nurseries, for perfectly understandable reasons. First, in line with Government objectives, HMRC’s estates strategy is to reduce the size of its footprint and either to hand back unwanted space to its landlord or to make more productive use of the estate that it retains.

[Mr McCann]

Will the Minister explain why it is Government policy to waste taxpayers’ money by giving up space that they would then have to continue to pay rent on and leaving custom-built nurseries lying empty when they can be utilised by staff?

[Mr Gauke]

The hon. Gentleman rightly said that we had a meeting about this matter; indeed, Lin Homer was present for that meeting. He should therefore be aware that Lin Homer repeatedly said that it was possible that the site in East Kilbride could be used for other purposes before 2015.

[Mr McCann]

That is not true.

[Mr Gauke]

That is what the hon. Gentleman was told repeatedly in that meeting, but if he is accusing me of saying an untruth or saying that Lin Homer did not say that, I would be grateful to hear it.

[Mr McCann]

I will be absolutely clear: I have given the Minister evidence that I have been given completely misleading information by civil servants in HMRC that was not true from day one. I am further saying to him that the space in East Kilbride will be empty until 2015. That was confirmed to me in a telephone conversation by the chief executive, Lin Homer, on 21 September.

[Mr Gauke]

We are talking about a somewhat hypothetical situation because, as the hon. Gentleman well knows, the site will remain used as a nursery. However, I have to tell him that Lin Homer corrected him on a number of occasions in the meeting we had. She did not say that the site was not going to be used until 2015; what she said was that there were no immediate plans for reuse, although she was not ruling out reuse of the site before 2015, which is a fairly substantial distinction. That is what the hon. Gentleman was told. If he did not understand it, that is regrettable, but that is what he was told repeatedly in that meeting.

To continue, in the 18 months to October 2012, HMRC closed 140 buildings and rationalised a further 44. That has resulted in nearly £47 million of savings annually and reduced HMRC’s estate by around 193,000 square metres—about 16% of its total estate over that period. The spaces left when the nurseries close will be used for HMRC’s core purpose. Retaining space for on-site nurseries simply does not fit into that strategy.

Secondly, given the low nursery occupancy by HMRC staff, the justification for HMRC retaining the eight nurseries is no longer as strong as it was. That is particularly true now that HMRC, like other public sector employers, provides child care vouchers to all eligible staff, which they can use to pay for child care in any nursery they choose. The vouchers cover staff in more than 300 HMRC offices, which is far more than the eight affected by the closure of the nurseries. In making the decision not to re-tender the contract with Bright Horizons, HMRC researched the local areas and was confident that other nurseries had spaces at prices comparable to, and often lower than, those for the places in the Bright Horizons nurseries.

Thirdly, and most importantly in my view, HMRC was providing space to the private sector nursery provider free of both rent and utility bills. I do not believe it is sustainable for a Department, in effect, to provide a direct subsidy to a profitable private company. During these times of austerity, public bodies have a duty to make more productive use of the resources that they are paying for. I believe that HMRC’s decision was the right and responsible one, but I also think it could have gone about it better.

We have heard the criticism that HMRC did not provide sufficient notice to parents. I agree that more notice would have been preferable, but HMRC was honouring the contract between the estates provider and Bright Horizons, and the contracts between Bright Horizons and the parents, which were for three months’ notice. HMRC, in effect, gave Bright Horizons six months’ warning that the contract would end in November 2012, but Bright Horizons chose not to tell parents earlier than the three months’ notice provided for in their contracts. HMRC could have told its own parents earlier, but it might then have been liable for compensation claims from Bright Horizons.

The hon. Member for East Kilbride, Strathaven and Lesmahagow has made public statements to the effect that HMRC deliberately gave short notice in order to curtail debate. That allegation is inaccurate and unfair. HMRC was, as hon. Members would expect of a public body, seeking to honour the terms of legal contracts. It is also important to observe that Bright Horizons was given time to seek alternative accommodation for its nurseries, but that it made a commercial decision not to relocate and instead to close these eight nurseries. That was not HMRC’s decision: it was down to Bright Horizons. However, it is perfectly understandable, bearing in mind that it would have needed to pay market rent for other properties and that the take-up of places was, I understand, declining.

We have heard questions about why HMRC did not extend the contracts for another year or two, or at least extend contracts in the nurseries with high HMRC occupancy. This was a single contract for all eight nurseries, so it was not possible, within the contract, to extend any individual nursery alone. It was a question of all or none. Also, at the time that the decision was taken, HMRC honestly believed that the contract could not be extended. This was not a contract directly with HMRC, but one between Bright Horizons and HMRC’s landlord, Mapeley. HMRC was not party to all the details. In fact, it later transpired that HMRC’s original belief was incorrect, and that the contract could have been extended by another year for all eight nurseries. But, in any event, at no point did Bright Horizons ask for an extension to the contract, when HMRC opened discussions with it in May 2012.

It is highly regrettable that HMRC did not have all the correct information, but that does not alter the reasons for it wanting to end the on-site nursery provision. Nor does it mean, as the hon. Member for East Kilbride, Strathaven and Lesmahagow has alleged, that a senior HMRC official deliberately misled him. I simply do not see any evidence to support that allegation.

[Mr McCann]

Time is evaporating fast, and I do not want the Minister to finish without having time to answer my direct questions. However, on the point that he has just made, I was provided with reasons on 5 September by Mike Falvey, the chief people officer, yet when I spoke to Lin Homer on 21 September, a completely different reason was given. Can the Minister explain that? Will he also answer the two questions that I put to him in my speech?

[Mr Gauke]

Let me make as much progress as possible. I believe that the letter that the hon. Gentleman received in early September was based on a genuine understanding by HMRC of what the situation was. It related to a contract between Mapeley and Bright Horizons. In his subsequent conversation with the chief executive of HMRC, however, she set out more fully the context and the reasons for making the decision.

I want to turn to the hon. Gentleman’s suggestion that HMRC cannot reuse the nursery space for any other purpose. That is simply not correct. What HMRC cannot and should not do is commit, long term, to giving part of its estate over to nursery provision when it needs the flexibility to use that estate for its core purpose, and when it cannot do that, to negotiate giving it back to its landlord.

Things have moved on since this Adjournment debate was granted, and I think that HMRC has reached a better outcome. It has shown itself to be responsive to staff concerns and to the representations from the hon. Member for East Kilbride, Strathaven and Lesmahagow and my hon. Friend the Member for Cardiff North. When staff asked HMRC to consider transitional support, it swiftly put a package of such support in place, including some short-term financial relief for parents facing higher nursery costs and flexible working arrangements to allow parents to search for and settle their children into a new nursery.

HMRC also reopened discussions with Bright Horizons and asked it to consider whether it would enter into a different commercial arrangement at the three nurseries at which HMRC staff accounted for at least half of nursery places, under new contracts. I am pleased that Bright Horizons has agreed to a new and separate temporary lease in East Kilbride and in Cardiff, but it has made it clear that it does not see a commercial case for the third site, in Nottingham. The new lease for East Kilbride and Cardiff will run until August 2015, at which point Bright Horizons would need to relocate the nurseries if it wished to continue. HMRC will not end the lease before that time, although Bright Horizons will be able to close or relocate the nurseries at any point before August 2015, provided that it gives HMRC four months’ notice. That is more than the customary three months’ notice.

I know that this arrangement does not cover all the sites affected, but I believe that it is a sensible outcome. It provides a reasonable package of support for parents affected at all eight nursery sites, and two and a half years’ more nursery provision at Cardiff and East Kilbride. The long-term outcome is the same—