UK Politics

Childcare costs scheme 'better for parents'

The government has promised to create a "better" childcare system for parents, by allowing them to claim back up to £1,200 a year in costs per child.

Children's minister Elizabeth Truss said the problem of affordability went "right up the income scale" and the new scheme would provide "choice".

Households where a parent does not work will not be able to claim the money.

Asked how this would affect stay-at-home mothers and fathers, Ms Truss said ministers backed "strong families".

The UK has some of the highest childcare costs in the world, with many people with two or more children saying it does not make financial sense for both parents to work.

'Prohibitive'

Under the proposed scheme, which will undergo consultation, parents will be allowed to claim back 20% out of a total of around £6,000 - what the government says to be the average annual price of a childcare place.

To be introduced from 2015, it would cover children up to five years old, but will build up "over time" to include under-12s.

Unlike the current voucher system, which only operates where employers support it, the new scheme would be paid per child, instead of per household.

Parents earning up to £150,000 a year each - or a maximum of £300,000 per household - would be eligible.

Ms Truss told BBC Radio 4's Today programme: "This is about giving parents choice. At the moment a lot of parents can't go out to work because the cost of childcare is prohibitive."

She added: "We believe in marriage and strong families and in families making choices."

"What we are recognising is that where families are earning between £20,000 and £40,000 a year, [they feel] it's not worth going to work because of the cost of childcare," Ms Truss said.

"What we need to recognise is that this new voucher system is much better than its predecessor. Now working families can access it."

It would reach 2.5 million households, rather than 500,000 under the current system, Ms Truss said.

Half of the funding for the £1.4bn scheme would come from the abolition of the previous system of childcare vouchers, and in part by funding switched from elsewhere in Whitehall.

Under the current employer-supported childcare voucher scheme, parents can receive vouchers for childcare worth up to £55 a week. This sum is deducted from their salary before tax is paid.

The saving in tax and national insurance is typically worth about £900 a year for a basic-rate taxpayer. Where both parents work, families can save about £1,800 a year.

These vouchers are available only to employees whose employer is part of the scheme, but the new policy is expected to be open to all working parents who meet the criteria.

Parents who already claim childcare vouchers through the old scheme would be able to continue to do so if they wish, but it would be closed to new claimants who would be moved to the new tax-free childcare scheme.

'Huge help'

Anand Shulka, chief executive of national childcare charity, the Daycare Trust, said an "almost universal" benefit had to be welcomed.

But, for Labour, shadow education secretary Stephen Twigg said: "Parents will be disappointed that three years into this government they will not get any help with childcare costs for another two and a half years.

"While working parents won't get any help before the next election, David Cameron is happy to help millionaires with a tax cut now."

He said the measure would not make up for the cuts the government has already made to support for children.

In other reaction, The Federation of Small Businesses said the plan would encourage more women to return to work and boost labour market "flexibility", while the Twins and Multiple Birth Association called it a "step in the right direction".

The Policy Exchange think tank said the subsidy would be a "huge help" to those on low incomes but warned there would be "some losers"

"A family with two working parents and one child will be worse off," said its education research fellow Harriet Waldegrave.

"If only one parent works, the family will not be able to get any support (unlike at present where the working parent can get vouchers), so it will be important to consider what this means for those families, for example, where one parent is in further education or training."

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