Childcare support scheme extended

Updated: 
George OsborneParents who do not work because they are carers will be eligible to claim childcare support worth up to £1,200 a year for each son or daughter under a new Government scheme, it was revealed today.

And the scheme - announced in Chancellor George Osborne's Budget in March - will also be extended to those who are off work during maternity or paternity leave.


Mr Osborne was today launching a consultation on the tax-free childcare voucher plans, which will offer support from 2015 to families where both parents work, as part of a £1 billion-a-year package of help with nursery bills.

Ministers believe the initiative will eventually help 2.5 million households, but it has come under fire from critics who say that it will direct more help to well-off families than the poor. 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.

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

And there have been protests over the exclusion of households where one parent stays at home to look after children.

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.

"We want to make the new scheme work in the way that is best for parents, so today we are asking for their views, and I'd like as many parents as possible to tell us what they think."

And 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. We won't let childcare costs stand in the way of parents' ability to work if they want to.

"Tax-free Childcare will put money in families' pockets, saving the typical two-child family up to £2,400 per year on their childcare costs and allowing parents more choice to work the hours they want."

The new scheme will cover 20% 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

New details released today made clear that people on parental leave after the birth of a baby will qualify for any children they already have and parents who do not work because they are carers will also be eligible.

The consultation proposes that the scheme should run in conjunction with the school year, so that parents of eligible children can receive support with childcare costs for the full school year and all children in the same class are treated consistently.

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

The thinktank's 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% of the income distribution will qualify for extra help, compared to 1.7 million in the top 40% by income.

"Within universal credit, support will only go to higher income households. 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. These are families where at least one parent is in low-paid, part-time work.

"It's crucial that, following this consultation, the Government adapts its scheme to help the poorest working families - the very people who find high childcare costs the biggest barrier to work."

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 spiraling and support taken away.

"This Government has hit hard-working parents. Families with two children have already lost up to £1,500 in childcare tax credit.

"This Government promised to be the most family-friendly ever, but hard-working parents have lost out while millionaires get a tax cut."



Neil Leitch, chief executive of the Pre-School Learning Alliance, which represents childcare providers, said the voucher scheme was unfair to stay-at-home mums.

"In the recent More Affordable Childcare document the Government gives a ringing endorsement of those parents who choose to stay at home and look after their children, saying they have 'the Government's full support'," said Mr Leitch. "However, when it comes to practical support that's where it stops, with the Government giving priority to a 'get back to work' policy.

"This tax break does nothing to support those who choose to sacrifice their salary and put their careers on hold to stay at home and look after their young children.

"We are disappointed that this £1,200 tax break will be dependent on both parents working and flies in the face of pre-election rhetoric where several MPs spoke of ensuring support for families in this way. To now offer this money to a couple whose dual earnings could reach £300,000 but not to a couple earning a fraction of this amount who choose to have one parent stay at home seems perverse.

"We would prefer the Government to properly fund universal childcare provision for all families, regardless of income. Instead, this seems to be more about dangling a £1,200 carrot to tempt mums back to work rather than providing real childcare choices."

Katie O'Donovan 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 and is inconsistent with other cuts, such as those to child benefit and to childcare tax credit. Another concern is that the current workplace vouchers be phased out rather than summarily scrapped, which would lead to some parents of older children being left worse off.

© 2013 Press Association