PM to decline childcare tax break

Children look at Prime Minister David Cameron during a visit to the Coin Street nursery in London, as the government have announced a new tax-free childcare allowance worth up to £2,000 per child -  to start after the 2015 general election. PRESS ASSOCIATION Photo. Picture date: Tuesday March 18, 2014. See PA story POLITICS Budget. Photo credit should read: Peter Macdiarmid/PA Wire

%VIRTUAL-SkimlinksPromo%David Cameron has revealed that he will not be taking advantage of the new tax break for childcare, worth up to £2,000 per child each year.

The scheme, unveiled on the eve of the Budget and due to come into effect in autumn 2015, will help around 1.9 million families with children aged under 12 where both parents work, at a cost of around £750 million.
Mr Cameron said that the policy would be "a huge help to millions of families across Britain", allowing parents to make the choice to work longer hours.

But it has come under fire from some quarters for excluding couples where one parent does not work and being offered to high-earning households with a joint income of as much as £300,000.

Visiting a nursery with Deputy Prime Minister Nick Clegg to launch the scheme, Mr Cameron revealed that he "won't be taking it up" for his own children Nancy, Elwen and Florence.

But Downing Street brushed off suggestions that he was seeking to send a signal to other wealthy parents that they should decline the cash. The Prime Minister's official spokesman said: "This is about giving families support for the choices they make. We are not here to give financial advice."

Labour said support for children and families had been cut by £15 billion since the coalition came to office in 2010 and pointed out that the policy will help far fewer families than the 2.5 million predicted when it was first outlined last year.

Describing the package as "too little too late", the party's spokeswoman for children Lucy Powell said: "Of course, any childcare support is welcome but this Government has done nothing in this
Parliament to help parents experiencing a cost-of-living crisis. Childcare costs have spiralled by 30% since 2010 and the Tories have rejected Labour's plan for 25 hours free childcare for working parents of three and four-year-olds."

But Mr Cameron said: "People I've been talking to are working two days a week, three days a week, who would dearly love to work another day or work some more hours, but they can't make the sums add up because the childcare is expensive and they are not earning enough.

"So this will help them to choose - do I want to work more? Do I want to take that choice to give more stability and security to my family? It's about helping parents to back the choice that they make."

The system will effectively allow parents to escape paying basic rate income tax of 20% on childcare costs of up to £10,000 - up from the proposed £6,000.

Self-employed and part-time workers will also now be covered by setting the lower earnings threshold at £50 per week and provision will also be made for those running fledging businesses.

The £1 billion package also includes a £50 million "early-years pupil premium" for nurseries looking after the most deprived three and four-year-olds.

And in what children's charity Barnardo's hailed as a "double victory" for the poorest families, it was confirmed that families claiming universal credit will have 85% of childcare costs met by the state, up from 70%.

The Institute for Fiscal Studies noted that the more generous scheme announced today was not accompanied by any additional cash. The Treasury sums added up because it had "significantly revised down" its estimate of how many families are likely to be eligible, said the thinktank.

Meanwhile, Labour pointed out that, even split between 1.9 million families, the cash available amounts to less than £400 each - well short of the £2,000 maximum. Claiming that the policy was "unravelling", Labour highlighted a forecast in the Government's own documents which suggested that the number of families with "qualifying childcare costs" would in fact be around 1.26 million.

But Economic Secretary to the Treasury Nicky Morgan said that the scheme was designed to be "simple and flexible" enough to respond to different families' arrangements. She told BBC Radio 4's World at One: "Families have different childcare needs: some will want to spend up to £10,000 or more on childcare - that's where the Government will be paying up to £2,000 - for some it will be less."

The IFS raised a note of caution over hopes that the policy will enable more parents to work.

"There is no consistent evidence from other countries that childcare support has large effects on parental labour supply," said the thinktank.

"While today's announcements bring welcome simplifications to the new taxfree childcare scheme, and an increase in generosity that will certainly be welcomed by families on Universal Credit using childcare and better-off families who spend more than £6,000 a year on childcare, the extent to which it will deliver its intended goals is essentially unknown."

The chief executive of the Pre-School Learning Alliance, Neil Leitch said he was "concerned" that the policy was "fixated on getting parents back to work and is not sufficiently targeted to benefit those most at need".

Mr Leitch said: "We would also challenge the wisdom of giving families with joint incomes of £300,000 per annum the same benefit. Many high-earning parents must be uncomfortable with this additional tax break."

Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: "Our research shows that childcare costs have risen by 37% in the last five years, so we welcome the Government taking steps to tackle this huge expense for families, and especially welcome the inclusion of all families on universal credit."

But she added: "Of the new childcare funding, £750 million is being used for tax-free childcare for potentially very high earners - only £200 million will support those who are worse off. Funding for childcare for poorer families must be prioritised."

Mr Clegg told BBC Radio 4's Today programme: "People who are on higher-than-average incomes, yes, they will benefit from this.

"We decided to do that because the more we looked at introducing a cut-off point at different income levels, the more complex it became."

25 PHOTOS
The 25 top quotes about career success
See Gallery
PM to decline childcare tax break
"Flipping burgers is not beneath your dignity. Your grandparents had a different word for burger flipping: opportunity."
"Do what you have to do until you can do what you want to do."
"Youngsters have got to stop thinking about becoming the next Zuckerberg. It's a trillion-to-one chance. What they need is mater and pater to say, 'Get a job, son."
"The only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on."
"It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all, in which case you have failed by default."
"I've missed more than 9,000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed."
"You've got to love what you do to really make things happen."
"Don't think what's the cheapest way to do it or what's the fastest way to do it, think 'what's the most amazing way to do it?'"
"You cannot delegate entrepreneurship – if you are going to make mistakes make them yourself."
"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."
"If you're an entrepreneur and want to start a business, start small. You can start a business on your own or just with a partner or assistant. It's only when you take on your first member of staff that you're more than likely to encounter other problems."
"The entrepreneurial instinct is in you. You can't learn it, you can't buy it, you can't put it in a bottle. It's just there and it comes out."
"Whether you come from a council estate or a country estate, your success will be determined by your own confidence and fortitude."
"If you're offered a seat on a rocket ship, don't ask what seat! Just get on."
"If you are successful, it is because somewhere, sometime, someone gave you a life or an idea that started you in the right direction. Remember also that you are indebted to life until you help some less fortunate person, just as you were helped."
"Focusing your life solely on making a buck shows a certain poverty of ambition. It asks too little of yourself. Because it's only when you hitch your wagon to something larger than yourself that you realize your true potential."
"Whoever decides to dedicate their life to politics knows that earning money isn't the top priority."
"I made my money without sector expertise, contacts or capital. I never had a USP, never had 'first mover advantage' or invented anything, and I didn't even do anything unique or that someone else couldn't have done. What I did have was a Yellow Pages and some determination – and that's all it takes."
"Everyone gets knocked back, no one rises smoothly to the top without hindrance. The ones who succeed are those who say, right, let's give it another go."
"Every day, you have to prove yourself and convince - move forward and challenge yourself. And doubt all the time."
"It is no good getting furious if you get stuck. What I do is keep thinking about the problem but work on something else. Sometimes it is years before I see the way forward. In the case of information loss and black holes, it was 29 years."
"My dad said to me, 'Work hard and be patient.' It was the best advice he ever gave me. You have to put the hours in."
"Behind every no entry sign there's a door."
"Women need to shift from thinking 'I'm not ready to do that' to thinking "I want to do that - and I'll learn by doing it."
"Son, if you really want something in this life, you have to work for it. Now quiet! They're about to announce the lottery numbers."
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE


Read Full Story

FROM OUR PARTNERS