Tax-free childcare - 'A long wait and doesn't help the poorest'

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Children's charities are concerned that families will have to wait for more than two years before the new tax-free childcare system is brought in and that not enough is being done to support families on the lowest incomes.

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The scheme has been criticised by some commentators because households where both parents earn up to £150,000 each will be able to take advantage of the scheme, while families where one parent works part-time or stays at home will not be able to sign up for the vouchers.

Labour said that the new scheme did not compensate families on low and middle incomes that have lost childcare support through cuts to tax credits.

Stephen Twigg MP, Labour’s shadow education secretary, said, ‘Parents will be disappointed that three years into this Government they will not get any help with childcare costs for another two and a half years. While working parents won’t get any help before the next election, David Cameron is happy to help millionaires with a tax cut now.

‘This announcement will not make up for the up to £1,500 that families on middle and low incomes have lost in cuts to childcare support – part of the £15 billion of cuts to support for children which will have been implemented before this announcement takes effect. Those who have seen their incomes cut because tax credits have been cut will not get any help, while families earning up to £300,000 will benefit. That is deeply unfair.’

Sarah Jackson, chief executive of Working Families, said it was ‘good news’ the Government was addressing the high cost of childcare, but she was concerned that some groups of parents would miss out.

‘Employer Supported Vouchers filled a gap in childcare support by helping families when one parent was studying or retraining,’ she said.

‘They also provided vital support if one parent was made redundant - they enabled a family to keep a childcare place open while the out of work parent looked for work. We are concerned that help with the new childcare vouchers will be limited to families with all parents in work. It is important that families in these situations don’t lose out, and that support is available to those trying to get back into work.’

‘It seems strange that low income families remain in a means-tested scheme, while higher income families get a non-means-tested system.’

She added that the scheme did not appear to provide extra help for those on the lowest incomes and that there needed to be more support for older children.

‘Parents find it difficult to work out whether to claim help with childcare costs through tax credits or vouchers now.  It isn’t clear how the two schemes will work together in future – will parents be able to choose which support to claim?’

Children’s charities said that the measure did not go far enough to support the poorest families.

Barnardo’s assistant director of policy Neera Sharma said, ‘These measures are a step in the right direction, but it is disappointing that they don’t go further to help the poorest families.

‘Although 20 per cent of the funding is aimed at families who receive Universal Credit, they won’t be helped until April 2016. This contrasts with the 80 per cent of funding for those earning up to £150,000 a year, who will receive support from April 2015.  Worse still, parents working part time for minimum wage will not benefit from this scheme at all and will still not be able to afford to increase their hours, leaving them unable work their way out of poverty.’

The Child Poverty Action Group said that the scheme would do very little to help reduce child poverty.

Chief executive Alison Garnham said, ‘Unfortunately, the plans announced today are massively complicated, poorly targeted and too many years away to provide comfort for families struggling right now. We are disappointed the new scheme is weighted heavily in favour of those on high incomes. With the economy still stagnant and child poverty rising, low income families need stronger work incentives today, not in three years’ time.

‘Accessing affordable childcare is a gateway to starting work for many parents. Restricting higher levels of childcare support under Universal Credit to parents only when they are already in work reinstates barriers in the crucial period of transition into work that universal credit sought to break down, so the danger is that only a smaller number of low-income families will actually benefit from this proposal.’

Save the Children said that crucially the plans would not help families on the lowest incomes back into work.

William Higham, director of UK policy at Save the Children said, ‘A policy that doesn’t benefit struggling families until 2016 will mean another three years of juggling costs amidst a deep recession. Some parents will be unable to work until that comes into force.

‘Parents tell us that they are desperate to take jobs, but the costs of childcare are crippling. Prioritising those families on lower incomes to find work would be a win-win situation – for both the economy and our country’s children.’

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