Childcare tax breaks come under fire

PLANS to give tax breaks worth £1,200 per child to families in which both parents work have come under fire for being unfair to stay-at-home mothers.

Chancellor George Osborne visited a nursery in Hammersmith yesterday and discussed tax-free childcare proposals. Picture: Getty

There has also been anger that high earners will be eligible for the scheme, and concern that single parents could lose out.

Chancellor George Osborne toured a nursery yesterday as he launched a consultation on the tax-free childcare voucher plans. The proposals – heralded in the Budget in March – will offer su pport from 2015 to families in which both parents work, as part of a £1 billion-a-year package of help with nursery bills.

The vouchers will be available to parents earning up to £150,000, so a couple with a combined income of £300,000 could claim them. By contrast, child benefit cuts have hit families in which one parent earns more than £50,000.

Parents who claim universal credit will benefit from a separate scheme under which the state will cover up to 85 per cent of their childcare costs – rather than 70 per cent as at present – though critics claim this is less generous than the help on offer to working families.

Mr Osborne said: “This government is on the side of people who want to work hard and get on in life. Tax-free childcare will help working parents by giving them more choice and better access to the quality, affordable childcare they need.”

Chief Secretary to the Treasury Danny Alexander added: “The government wants to build a stronger economy and a fairer society and key to that is getting more people into work. Tax-free childcare will save the typical two-child family up to £2,400 per year on their childcare costs, allowing parents more choice to work the hours they want.”

The scheme will cover 20 per cent of working families’ childcare costs up to a limit of £6,000 per year per child, meaning that up to £1,200 could be claimed for each child. The average cost of a part-time nursery place for a child under two in the UK is now over £5,000 per year.

However, the Resolution Foundation think tank, which campaigns for low-income workers, warned that the bulk of the money will not go to the poorest households.

Their deputy chief executive Vidhya Alakeson said: “Our analysis shows that only a tiny fraction of the new money will benefit the lowest-income working families. Just 160,000 families in the bottom 40 per cent of the income distribution will qualify for extra help, compared to 1.7 million in the top 40 per cent by income. More than 900,000 working families with children who will receive universal credit will be excluded from extra childcare support because they do not earn enough to pay income tax.”

Justine Roberts of parenting website Mumsnet said: “Mumsnet users have been calling for help with the ever-rising cost of childcare, which is a serious impediment to many mothers returning to work after children for some time, so we welcome the additional funding going into this scheme.

“However there is concern that single-parent households might lose out whilst some very high earning two-parent households will benefit. A couple could earn £300,000 a year and still benefit. That doesn’t seem sensible.”

Labour families spokeswoman Sharon Hodgson said: “Only David Cameron’s government could be so out of touch that they expect families to be grateful for help with childcare in 2015 when they’ve already seen costs spiralling and support taken away.”