By Vivienne Russell | 19 March 2013
The government is to ‘massively extend’ the tax-free childcare support available to working parents with young children, Prime Minister David Cameron and Deputy Prime Minister Nick Clegg announced today.
The scheme is to be phased in from autumn 2015. In its first year of operation, an estimated 1.3 million families with children under five will be able to claim childcare vouchers equivalent to 20% of their yearly childcare costs, up to £6,000 per child. For a typical working family, the government contribution is estimated to save them £1,200 per child per year.
To be eligible, all parents in the household must be in work, each earning no more than £150,000 a year and not be in receipt of tax credits. In time, the scheme is to be extended to include families with children under the age of 12, benefiting around 2.5 million households.
Families in receipt of tax credits, and subsequently, Universal Credit, will benefit from a parallel scheme that will offer them support for up to 85% of their childcare costs.
A consultation will help determine how the two schemes can work together effectively, the Treasury said.
Cameron said the government had to help those who wanted to work hard and get on.
He said: ‘Too many families find paying for childcare tough and are often stopped from working the hours they’d like. That is why we are introducing tax-free childcare, saving a typical family with two children up to £2,400 a year.’
Clegg echoed these sentiments, saying hard-working families should be helped financially.
‘An extra £1,200 for each child will make a real difference to families who find themselves constantly worrying about how to juggle their family budget,’ he said.
‘And extending support for working families on Universal Credit will make sure it is worth working extra hours even if you’re on low wages.’
Anand Shukla, chief executive of the Daycare Trust and the Family and Parenting Institute, said the government deserved praise for committing new resources to childcare.
But he added that there were questions over why families with one parent staying at home with the children were being left out of the support.
Shukla said there was also a risk that investing in a subsidy could push up already high childcare prices even further.
‘We need to ensure that extra financial support doesn’t have an inflationary effect, which would negate the impact of new support,’ he said.
‘Our preference would be for the government to invest directly in providers through the free childcare offer and focus resources on improving quality. Parents want affordable, flexible and high-quality childcare and the approach the government has taken is not the most effective way of achieving this.’
