Tax-free childcare measures praised

New tax-free childcare measures worth up to £2,000 a year per child have been welcomed by campaigners, amid warnings that more help may be needed for the poorest families.

New measures to help families with childcare costs have been announced by the Government
New measures to help families with childcare costs have been announced by the Government

Under the Childcare Payments Bill, included in today's Queen's Speech, a new scheme is due to be introduced to give working families basic rate tax relief on money spent on childcare.

The legislation will entitle anyone who is responsible for a child to gain support with the cost of nursery, a childminder or other types of childcare.

For every £8 a parent pays for childcare, the Government will contribute £2, according to Treasury information, with support capped at £2,000 per child per year.

The scheme is set to be introduced in the autumn of next year, with families who have children under 12 eligible within the first year, the Government said.

It added that in the first 12 months, around 1.9 million working families are expected to benefit.

Liz Bayram, chief executive of PACEY (the Professional Association for Childcare and Early Years) said: "PACEY welcomes the Government's commitment to provide more financial support for parents through the tax-free childcare offer. We know that measures improving access to childcare will help to give more support to families balancing work and home life.

"However, PACEY believes childcare funding needs a complete overhaul. Whilst this is helpful news it will not make a difference to the most disadvantaged families."

Ben Black, founder of My Family Care, a firm offering childcare support to businesses, said: "This is good news. It is much more generous and broader than many of us dared hope for.

"It's also simple to understand and execute - something that has been wholly missing from previous childcare funding initiatives."

To be eligible for the support a parent and their partner, if they have one, must be in paid work, earning more than they would receive for working eight hours a week at the national minimum wage.

The parent's income and that of their partner should not exceed £150,000 and they should not be claiming Universal Credit, or other support for childcare.

Chris Goulden, head of poverty research at the Joseph Rowntree Foundation, said: "The Government has made important progress towards extending childcare support to all families who will be eventually moved on to Universal Credit. But this concession contains a major sting in the tail, with the extra costs expected to be borne by savings elsewhere in the welfare budget.

"Childcare is essential for working families. Not only can good quality early years education and care help support child development, but affordable childcare makes work pay for those on low incomes and helps to lift more families out of poverty.

"Bringing down the cost of childcare would have a significant impact on the ability of low income households to work. But this help should not be funded by cutting their help in other areas. This is more important than subsidising childcare for very high-earning families: most of the extra support will be going to families with higher incomes, including households where both parents are earning just below the additional rate tax threshold, set at £150,000."

Matthew Reed, chief executive of The Children's Society, said: "Childcare is critical to making work pay for the millions of working families struggling to make ends meet on low incomes.

"But this measure overlooks the families that are on Universal Credit. In addition, too often families miss out on this crucial help because the system is too complex, pushing them and their children into poverty. The Government's moves to make childcare more available can only be effective if it makes sure the system is simple and accessible."