The government has announced a tax break of up to £1200 on childcare spending of £6000 pa per child under five from autumn 2015.
The proposal would particularly benefit wealthier families and leave some families worse off. Given the childcare crisis now facing families, the proposal is ‘too little, too late’.
The proposal raises many questions:
- Much of the funding would be recycled from the current tax exemption on childcare vouchers which currently provides up to £933 per working parent (ie up to £1866 for a family where both parents work)
- Only those families able to spend £6000 pa per child on childcare up front will realise the full tax benefits ie those on higher incomes
- It won’t tackle the growing crisis in childcare – with the number of childcare places falling, providers closing and costs rising for low and middle income parents who need help now
- It also raises questions about how the tax break will be administered by HMRC, voucher companies and childcare providers promising an administrative ’dog’s dinner’; also it won’t start until late 2015 and not until 2020 for older children
This proposal will only benefit a limited number of mainly wealthier parents and some will be left worse off. Many more families are facing the childcare crisis of rising costs and falling places. There is a real danger that the proposed tax break will push up costs further and create a two-tier childcare system. It’s too little, too late.
This is short-sighted. Access to childcare helps give children a good start in life and enables parents to stay in work. Research shows that parents who can return to work after having children have much better career and income prospects for the rest of their life. Better childcare is crucial to Britain’s future economic and social success.
The government needs a new national childcare strategy to make quality childcare more affordable and sustainable. This must include proper funding for free childcare places for two, three and four year olds. And the government must simplify the complex funding of childcare to make better use of the funding and to target help to low and middle income parents. A new online childcare account would help achieve this. 19 March 2013
An excellent response to this shoddy measure.
I think I am right that my daughter and her husband will be worse off. At the moment my daughter gets £243 month tax free and so does her husband. When the new system comes in they would get £1200 a year tax free per child. Currently they save £2000 a year so child care is reduced to £8000/year. With the £1200 they will be £800 worse off? A months child care costs! I hope I have calculated this correctly.