Childcare tax break for working parents on the cards, as coalition releases mid-term review

The plan was mooted as a range of proposals were set out in a mid-term review report which will was unveiled by the Prime Minister and Deputy Prime Minister on Monday 7 January.

However, any more details of how such a proposal would work in practice are not likely to follow until later this month when the Government reports on the Childcare Commission.

The review sets out the direction of policy for the Coalition up until the next election.

It is understood that a major policy announcement from the review will be announced every week for the next 12 weeks in the run-up to the budget.

In a joint foreword to the review, Mr Cameron and Mr Clegg say, ‘We are dealing with the deficit, rebuilding the economy, reforming welfare and education and supporting hard working families through tough times.’

They insist they remain ‘steadfast and united’, despite not seeing ‘eye to eye’ on some issues.

They add, ‘We will support working families with childcare costs. We will build more houses and make the dreams of home ownership a reality for more people. We will set out plans for long-term investment in Britain’s transport infrastructure.

'We will provide two big reforms to provide dignity in old age: an improved state pension that rewards saving and more help with the costs of long-term care.

‘And as we take these steps to reshape the British state for the 21st century, we will take further steps to limit its scope and extend our freedoms.’

But experts warn that tax relief on childcare may not reach the poorest families.

The Resolution Foundation, which has just published an analysis of childcare and housing costs, warns that tax relief on childcare will do little to reach families on low and middle-incomes, for whom childcare costs are a real barrier to work.

Alex Hurrell, senior analyst at the Resolution Foundation, said, ‘Based on what we know about the take up of childcare vouchers that currently provide some tax relief for childcare costs, an extension of tax relief will only benefit better off households. This is hardly a policy for the "strivers" that the Government claims it wants to support.’

Ryan Shorthouse, researcher at the Social Market Foundation, said, ‘There is a danger that tax relief for childcare will be regressive with high income couples receiving more financial support from Government and non-working families or those on very low incomes receiving no support at all. It could also be very expensive. Where will this money come from? A fairer and more credible policy is SMF’s idea of giving parents the opportunity to access government-backed loans which they repay on an income-contingent basis. This would be costless to Government and would mean parents spend substantially less on childcare each month when their children are young.’

The National Day Nurseries Association welcomed the coalition’s commitment to childcare as a key policy area and more support for childcare costs for working families, but stressed that funding should be simplified and paid directly to providers.

Chief executive Purnima Tanuku said, ‘NDNA believes that all children and families should have access to high-quality childcare provision. Childcare supports working parents and enables children from all backgrounds to benefit from high quality early education, which is vital to give children the best possible start in life.

‘With the Government expected to announce tax breaks to help working families pay for childcare, it is vital this funding reaches childcare providers on the front line so they can continue to support families with high-quality childcare. We would like to see state-funded childcare support simplified and paid directly to childcare providers to make childcare more affordable for parents.’