Demands for more affordable childcare to help working parents

The call comes amid speculation that the UK Government is to step back from planned cuts to child benefits that experts claim will cost more than 1.2 million families up to £2,500 a year.

Households with at least one member earning more than £42,475 are to lose their child benefit payments in January next year under coalition government plans.

Critics of the proposals argue that families with a single member earning above £42,475 would lose out while those with a couple each earning just below the top rate of tax could take home more than £80,000 between them and still receive the payment.

The government is reviewing the plans ahead of the Budget on 21 March. A rise in the income cut-off point or even a cap on the number of children for which the benefit is paid is now more likely than abandonment of the plans altogether. Even if the government does perform another U-turn, however, the cost of childcare for working families in Scotland seems set to rise regardless.

Scottish childcare costs are among the highest in the world, research by the Daycare Trust has revealed. More parents in Scotland are being forced to give up their jobs – or turn down job opportunities – because of spiralling childcare expenses, with only the wealthiest families able to comfortably afford to pay for someone to look after their children, the report claimed.

Anand Shukla, chief executive of the Daycare Trust, said: “At a time when family and government finances are so stretched, and the Treasury is looking to maximise tax revenues and reduce benefit expenditure, it is sheer folly that any parent has to leave work because they cannot afford to pay for childcare.”

Average weekly prices for nursery care for children under two in Scotland range from £64.50 to £142.50, varying hugely between different local authorities, according to new figures from the Daycare Trust and the Children in Scotland charity.

Scottish parents using the most expensive nursery pay almost £12,000 a year for 25 hours of care for 50 weeks.

Another study, by insurer Aviva, last year found that the average Scottish mother with two children and a full-time job has just £113 a month left over once childcare costs are covered. It estimated the typical childcare bill for youngsters under two – before they can go to a state funded nursery or school – at almost £730 a month.

Rising costs have been exacerbated by government cuts, even if the planned child benefit axe lands on higher earners.

The maximum proportion of childcare costs covered by working tax credits was chopped last April from 80 to 70 per cent – with affected families losing out on £545 a year on average – while the child benefit payment has been frozen.

Citizens Advice bureaux in Scotland have seen a marked increase over the last year in clients struggling to pay for childcare as a result of those measures. “Child benefit in particular is specifically for the child, so freezing that is a kick in the teeth at a time when families are trying to cope with high energy bills and rising food prices,” said Matt Lancashire, policy officer at Citizens Advice Scotland.

And from next month, lone parents of children as young as five are to be shifted from income support to jobseeker’s allowance. This bureaucratic-sounding measure is more significant than it sounds, as those on jobseeker’s allowance have to apply for jobs or face losing their benefits. Those that do land work will have to find a way of funding childcare.

The impact is greater for Scottish parents as local authorities north of the Border, unlike those in England and Wales, do not have a duty to provide affordable childcare.

With Daycare Trust figures showing that more than seven in ten local authorities in Scotland cut their childcare and play services budgets in the year to June 2011 – compared with 62 per cent in England and 23 per cent in Wales – assistance for families north of the Border is drying up.

The absence of a duty on Scottish local authorities to provide affordable childcare is a prime reason why costs are higher north of the Border than elsewhere in the UK, said Lancashire.

“There’s a real disparity, because while local authorities south of the Border have to provide affordable, suitable childcare, the Scottish Government has not placed any requirement on local authorities here to do so,” he said. “If local authorities were told to do that, it would push childcare costs in Scotland down.”

The outcome – one with real consequences for the wider Scottish economy – is greater barriers to work. If childcare costs continue to rise, more parents will be forced to ask whether they are better off looking for or staying in work or taking benefits, Lancashire claimed.

The problem is particularly acute in rural areas, where access to affordable childcare is limited. “In rural parts of Scotland people often find they are unable to take up job opportunities because of a lack of childcare options. We’ve seen cases even in urban areas where childcare is one of the biggest barriers faced in moving back into the workplace”.

But even in the face of soaring costs, too few families take advantage of financial assistance available to them.

Some £6.4 billion in child tax credit and working tax credit goes unclaimed each year, government figures show, due largely to low awareness of the financial assistance available to families.

The same awareness problem hinders take-up of employer childcare voucher. A third of working parents claim not to have been offered childcare vouchers by their employer, with 22 per cent saying they would take them up if they had been made available, according to research last year by Co-Operative Employee Benefits.

It also found that 45 per cent of working parents were entirely unaware of the vouchers and how they could save them money.

“There is assistance out there that can help people get back into work or stay in the workplace,” said Lancashire. “But there needs to be better awareness of it and some firms could be more public about what they can do to help.”

The rise in childcare costs - how to fight back

• Are you claiming all the support you’re entitled to?

The childcare element of working tax credit pays up to 70 per cent – cut from 80 per cent last year – towards the cost of childcare up to a limit of £175 a week for one child and £300 a week for two or more..

To be eligible for this, lone parents must work at least 16 hours a week, while parents who are part of a couple must both be in paid employment for 16 hours a week or more. A couple also qualify if one works those hours but the other doesn’t because they are in hospital, prison or “incapacitated for childcare purposes”. Check the tax credit calculator at www.hmrc.gov.uk or call the tax credits helpline on 0845 300 3900.

Parents in Scotland with children aged three and four can claim up to 12.5 hours a week of free childcare, without any means testing requirement.

• Get help from your employer.

Companies can offer workers financial support, including childcare vouchers, workplace childcare services or directly contracted childcare. For basic rate taxpayers, childcare vouchers up to the value of £243 a month/£55 a week are exempt from tax and National Insurance contributions.

Where both parents in a couple take advantage, the annual savings on childcare could reach more than £1,800, based on a £55-a-week exemption.

The exemption is £28 and £22 a week for higher and additional rate taxpayers respectively. The vouchers can be used for children up to the age of 15 – or 16 if they are disabled – and can cover some or all of the cost of care including a day nursery, nursery school, childminder, playgroup or creche, qualified nanny and a holiday scheme.

• Nanny share.

This is relatively rare, but becoming more widely adopted. The option may make sense for some part-time workers who can share a nanny with another family whose working days and hours complement their own. You can search for households in your area who are in a similar situation at www.nannyshare.co.uk. A quick search of central Edinburgh, for example, brings up five families either with a nanny to share or wanting one.