More than 2.5 million families will each be able to claim up to £1,200 to help subsidise the costs of child care under a £1 billion scheme to be unveiled by David Cameron and Nick Clegg.
10:01PM GMT 18 Mar 2013
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From the autumn of 2015, working parents will be able to claim vouchers to
subsidise nannies or child care for every child under five, with the scheme
expected to be extended to all children under 12 by about 2020.
It will initially benefit 1.3 million families, who will be able to claim up
to £1,200 for each young child — rising to 2.5 million families when the
scheme is extended. They will effectively not have to pay basic-rate tax on
the first £6,000 they spend on child care.
The scheme will not be available for stay-at-home mothers, which is expected
to cause renewed allegations that the Government is neglecting traditional
families.
The scheme is being introduced following the scrapping of child benefit for
higher earners. The move saved the Government similar amounts of money to
that now being spent on the new scheme, but it benefited all families.
The Prime Minister will claim that the policy is “one of the biggest measures
ever introduced to help parents with child care costs”.
“Too many families find paying for child care tough and are often stopped from
working the hours they would like,” Mr Cameron will say. “This is a boost
direct to the pockets of hard-working families.”
The Deputy Prime Minister will add that the high cost of child care is undermining the economic recovery.
“Delivering tax-free child care is the next step to ensuring all families can work and get on,” Mr Clegg will say. “The rising cost of child care is one of the biggest challenges parents face and it means many mums and dads simply can’t afford to work. This not only hurts them financially, but is bad for the economy, too.”
Under the scheme, parents will be able to claim vouchers to cover 20 per cent of the costs of child care up to £6,000.
The maximum subsidy will be £1,200 for each child. The vouchers will only be available in households where all parents are working — and where no one is earning more than £150,000 a year.
The scheme will cost £750 million with an extra £200 million to help those claiming universal credit, meaning that the Government is providing almost £1 billion in extra support for families.
The costs will rise significantly as support is extended to those with children under the age of 12.
George Osborne, the Chancellor, is expected to set out in Wednesday’s Budget how the scheme will be funded.
The scheme will replace policies which allow employers to offer tax-free child care vouchers to their workers. Such subsidies, which are only offered by larger employers, allow parents to save up to about £1,100 annually to cover the child care costs of their entire family.
Each employed parent can currently claim the vouchers, and they can be used to cover the full costs of care. The new system, however, is on a per-child basis — and the vouchers can only be used to subsidise 20 per cent of such costs.
From autumn 2015, parents already claiming vouchers can continue to receive this support or switch to the new system. New parents will only have access to the latter scheme.
Treasury sources insisted that the new system would benefit about three times as many people, with most families able to claim more. But the policy will ignore the interests of 1.2 million parents who choose to stay at home to look after their children, many of whom have lost child benefit this year.
Several Cabinet ministers are understood to have “major reservations” about the Prime Minister’s failure to introduce the marriage tax break to help this group. One minister said that Mr Cameron “needs to be looking at what can be done for stay-at-home mothers as a matter of urgency”.
Mr Osborne will not outline plans for a marriage tax break in the Budget.
The disclosure of the child care scheme follows months of wrangling within the Coalition about supporting working parents. It was due to be announced at the beginning of January, with negotiations delaying plans which were due to be unveiled in the Budget.
Because both the Conservatives and Liberal Democrats are desperate to be associated with measures to help struggling families, the Prime Minister and his deputy will now announce the package at a joint appearance.
Britain has some of the highest child care costs in the world, which ministers believe is why fewer mothers return to work in this country compared with Germany, France and the Netherlands. According to the Organisation for Economic Co-operation and Development, a working mother in Britain will keep only 32 per cent of her income, far less than in most other countries.
The Chancellor’s Budget is expected to focus on helping people with the rising cost of living and boosting economic growth. Mr Osborne announced on Monday that reforms to the state pension and social care will also be brought forward. He is also considering freezing fuel duty, but warned that he cannot afford sweeping tax cuts.
The Deputy Prime Minister will add that the high cost of child care is undermining the economic recovery.
“Delivering tax-free child care is the next step to ensuring all families can work and get on,” Mr Clegg will say. “The rising cost of child care is one of the biggest challenges parents face and it means many mums and dads simply can’t afford to work. This not only hurts them financially, but is bad for the economy, too.”
Under the scheme, parents will be able to claim vouchers to cover 20 per cent of the costs of child care up to £6,000.
The maximum subsidy will be £1,200 for each child. The vouchers will only be available in households where all parents are working — and where no one is earning more than £150,000 a year.
The scheme will cost £750 million with an extra £200 million to help those claiming universal credit, meaning that the Government is providing almost £1 billion in extra support for families.
The costs will rise significantly as support is extended to those with children under the age of 12.
George Osborne, the Chancellor, is expected to set out in Wednesday’s Budget how the scheme will be funded.
The scheme will replace policies which allow employers to offer tax-free child care vouchers to their workers. Such subsidies, which are only offered by larger employers, allow parents to save up to about £1,100 annually to cover the child care costs of their entire family.
Each employed parent can currently claim the vouchers, and they can be used to cover the full costs of care. The new system, however, is on a per-child basis — and the vouchers can only be used to subsidise 20 per cent of such costs.
From autumn 2015, parents already claiming vouchers can continue to receive this support or switch to the new system. New parents will only have access to the latter scheme.
Treasury sources insisted that the new system would benefit about three times as many people, with most families able to claim more. But the policy will ignore the interests of 1.2 million parents who choose to stay at home to look after their children, many of whom have lost child benefit this year.
Several Cabinet ministers are understood to have “major reservations” about the Prime Minister’s failure to introduce the marriage tax break to help this group. One minister said that Mr Cameron “needs to be looking at what can be done for stay-at-home mothers as a matter of urgency”.
Mr Osborne will not outline plans for a marriage tax break in the Budget.
The disclosure of the child care scheme follows months of wrangling within the Coalition about supporting working parents. It was due to be announced at the beginning of January, with negotiations delaying plans which were due to be unveiled in the Budget.
Because both the Conservatives and Liberal Democrats are desperate to be associated with measures to help struggling families, the Prime Minister and his deputy will now announce the package at a joint appearance.
Britain has some of the highest child care costs in the world, which ministers believe is why fewer mothers return to work in this country compared with Germany, France and the Netherlands. According to the Organisation for Economic Co-operation and Development, a working mother in Britain will keep only 32 per cent of her income, far less than in most other countries.
The Chancellor’s Budget is expected to focus on helping people with the rising cost of living and boosting economic growth. Mr Osborne announced on Monday that reforms to the state pension and social care will also be brought forward. He is also considering freezing fuel duty, but warned that he cannot afford sweeping tax cuts.
