To the point: Who are the real losers?

Earlier this month, the government launched a 12-week consultation on how to implement the new childcare support announced in this year’s Budget. It’s remarkable how much media coverage you can get in the quiet month of August for proposals that are not new. This month’s announcement was the same as the one five months ago. This time, however, the stay at home mums’ lobby was fully armed and took to the airwaves to argue that their case for a share of the nearly £1 billion new investment.

But they are not the only ones to lose out. Low earners are also overlooked by the current proposals but their case has been largely missing from the discussion so far.

Stay at home mums feel they are getting a hard time from this Government, a Government they had expected would be on their side.The better off among them have lost child benefit and now the Government has excluded them from the new tax free childcare voucher by targeting families in which both parents work. But the bottom line is that families with one parent at home don’t need additional support for childcare.  The early years entitlement is available to them as much as it is to all families regardless of income or work and the Government is right to focus additional support on those who have no choice but to have both parents in work.

Other countries, such as Norway, that introduced payments for women with young children to stay at home have started to back away from that policy because it has been found to damage the labour market prospects of women.

While the stay at home mums dominated the news agenda on the day of the consultation launch, some of the least well off families also miss out on the new support, although they were barely mentioned. Here, the Government’s policy does not even match its own objectives. Its decision to offer families eligible for Universal Credit 85 per cent support with childcare costs rather than 70 per cent if both parents pay income tax was intended to make it pay for second earners to increase their hours from part to full-time. But it only improves things for higher paid second earners.

A second earner on the minimum wage will continue to pay to work if she works more than part-time. Her family is actually worse off if she works 25, rather than 15, hours a week. Despite the fact that lower earning families need the most help with childcare costs, the new support on offer to those in Universal Credit prioritises a higher earning teacher and her family over a minimum wage earning cleaner and her family.

Fortunately, the consultation provides an opportunity to rethink how the nearly £1 billion on offer for childcare is spent. Instead of two different levels of support within Universal Credit, there should be one rate for all working families set at 85 per cent. According to official estimates, this would cost an additional £200 million. This could be found by restricting eligibility to the tax free childcare voucher. Families on incomes of £300,000 do not need support with childcare costs.