Childcare plans dismissed as 'au pair subsidy' for richest families

David Cameron and Nick Clegg‘s plans to offer discounted childcare have been branded an “au pair subsidy” as families earning up to £300,000 will be eligible for the new scheme.

Labour said the richest families with expensive nannies would benefit most from the tax break, which offers 20% off the cost of childcare up to a maximum of £2,000 per child. To get this top amount, they would need to be spending £10,000 per child per year.

In contrast, the average family helped under the proposals will only get around £400 off their costs, based on estimates of 1.9 million families claiming under the £750m scheme.

Lucy Powell, the shadow childcare minister, said this would not compensate families for previous cuts to childcare schemes under the coalition.

“The scheme will benefit the most those who have the highest childcare costs. They tend to be the highest earners,” she told the Guardian. “The government is implying everyone will be £2,000 a year better off. But for the average family it will be less than £500. It will be only those with the highest childcare costs, like expensive nannies, who will get the full amount. It’s a missed opportunity to create a system that is more progressive.”

Adding to the criticism, Jamie Reed, a shadow health minister, tweeted that the scheme was too little, too late and that it “sounds more like an au pair subsidy for those earning £300,000 per year”.

Citizens Advice, the national charity, also suggested some of the money would be better spent on helping lower income families, although the scheme was welcomed as a positive first step. “Rather than giving additional help to high earners, ministers should focus their efforts on helping those on the lowest incomes,” said Gillian Guy, its chief executive.

“Giving parents on low wages 95% of their childcare costs and making sure all children in households receiving universal credit get free school meals would be a much better and more targeted use of money.”

The childcare scheme, unveiled just before the budget, is one of the coalition’s central election offers to middle class working parents. A similar offering was announced last year, but Cameron and Clegg revealed on Monday that it would be available for anyone with children up to the age of 12 instead of the previous cutoff age of five. It will also be brought in by autumn 2015 rather than phased in over seven years and the maximum level of help has been increased from £1,200 per child.

Clegg, the deputy prime minister, has insisted the package of measures to help families with childcare costs is balanced, especially as poorer families on universal credit would now get 85%, rather than 70%, of their costs paid under the scheme.

However, the Lib Dem leader also admitted that the scheme would benefit the better off. “People who are on higher than average incomes – yes, they will benefit from this,” Clegg told the Today programme on BBC Radio 4 on Tuesday.

“We decided to do that because the more we looked at introducing a cut-off point at different income levels, the more complex it became.

“What families tell us is they want it to be done as simply as possible … So it is a balanced package but it is also a very simple one.”

Cameron has said that “tax-free childcare will help millions of hard-pressed families”. He will not benefit from the scheme himself but his spokesman would not say whether this was because his family income is more than £300,000 a year.

The overall cost of the programme remains at £750m a year because the Treasury has revised its estimate of the number of families likely to be eligible for the scheme down from 2.5 million to 1.9 million.

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Childcare plans dismissed as 'au pair subsidy' for richest families
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