Childcare subsidy will boost economy, says PM David Cameron

• David Cameron said new policy will help get parents into work
• The scheme will allow Government to contribute to ‘tax-free’ childcare
• But some Tory MPs complained the handout ignores stay-at-home parents
  

By
James Chapman

PUBLISHED:

23:45 GMT, 18 March 2014

|
UPDATED:

11:46 GMT, 19 March 2014

Getting more parents out to work with up to £2,000 a year in childcare subsidies for every child will be ‘good for the economy’, David Cameron said last night.

The Prime Minister said the scheme, details of which will be confirmed in today’s Budget, was not about ‘pushing people into a particular choice’.

His comments came after some Tory MPs complained the handout will only be available to couples in which both parents work, discriminating against stay-at-home mothers and fathers.

But Mr Cameron suggested there was an economic reason for targeting two-earner families, saying: ‘I think it’ll make a big difference to families across the country, it’ll be good for them and good for the economy too.’

Under the scheme, couples will be able to open new online ‘tax-free childcare’ accounts, to be run by HM Revenue & Customs, and National Savings & Investments. Any money paid in to them will attract a 20 per cent subsidy from the Government. The accounts can then be used to pay any registered childcarer.

It is not technically tax relief, because people will pay in using taxed income and it is not administered through the tax system.

But the 20 per cent top-up means that effectively, participants will have their basic rate tax refunded, and this is why Treasury has called the scheme ‘tax-free childcare’.

Labour branded the scheme ‘an au pair subsidy’, because it will be available to families earning as much as £300,000 a year.

The inclusion of couples earning up to the top 45p tax band – £150,000 each – is seen as an attempt to assuage Tory MPs calling for action on the 40p tax band to help squeezed middle-class professionals.

The Prime Minister insisted other measures were being brought in to help stay-at-home parents, including 15 hours of free childcare for three- and four-year-olds.

But former Conservative children’s minister Tim Loughton said further measures would be necessary to avoid penalising stay-at-home parents.

‘One-earner married couples make great sacrifices to save the state the cost of bringing up their own children and deserve a level playing field,’ he said. There were also doubts about the administration of the scheme, which will open in autumn next year and benefit an estimated 1.9million families.

Last night the Institute for Fiscal Studies expressed concern about how officials will police a system in which one member of a couple only has to earn £50 a week in order to qualify.

It said it appeared people would ‘only need to self-certify that they are earning more than £50 a week’.

‘There will be a very large incentive for some second earners to claim they are earning that much: it could be worth thousands of pounds in childcare subsidy,’ it said.

Critics also questioned the coherence of removing child benefit from higher earners, only to give them similar sums back in the form of childcare tax breaks.

Lucy Powell, Labour’s childcare spokesman, said: ‘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.’

Mr Cameron said: ‘We chose the cut-off point at the higher rate of tax, because if you set these schemes at different levels, it becomes more form-filling, more complications. This is targeted at couples when they’re working hard and struggling to pay childcare bills.’

He and Mr Clegg indicated they would not claim the allowance. It is thought their family incomes are likely to breach the earnings threshold.

Anand Shukla, of the Family and Childcare Trust, welcomed the move, saying: ‘An investment in childcare is an investment both in our economy and in our future.’

A Treasury spokesman insisted the system would not be abused: ‘The tax-free childcare registration process includes checks to ensure that parents are eligible and further checks will be made on their quarterly updates.’

Comments (760)

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The comments below have not been moderated.

ladyblue,

Northants,

15 minutes ago

why are some comments shown twice or even thrice when mine don’t get shown at all?

LUCREZIO BORGIA,

London, United Kingdom,

30 minutes ago

I do not have children. I do not wish to have children. I am not married. WHEN will the fiscal discrimination against non-breeders and non-married END?

Athina,

Dundee, United Kingdom,

32 minutes ago

This measure is to encourage mothers back to their jobs or to find, at least, part time work, not for mothers who choose to stay at home with their children. All credit to them, but they have made that choice.

Carol,

London,

36 minutes ago

Why should you get money for being at home? This money is being paid when both parents are out working, and so have to fork out loads on childcare. If you are at home, then you are looking after your children, and so no costs arise. If you want extra dosh – get out to work!

wella,

Liverpool,

39 minutes ago

Hannah your reward is your children and being brought up exactly as you want them . Why should you be rewarded with money – you choose to have children and you choose to stay at home and mind them

wendy-uk,

Brighton, United Kingdom,

39 minutes ago

Of coure this “ignores stay at home mothers”, they’re at home, they don’t need childcare! Giving a tax break for childcare to stay at home mothers would be as stupid as giving me the same tax break when I don’t have any children. Talking of which, how about some tax breaks for those of us who have chosen not to burden the state by having children?

zen_cyfarwydd,

Newbury, United Kingdom,

44 minutes ago

He’s got it the wrong way on. We shouldn’t be giving mothers the money to pay someone else to look after their children, one parent on the average wage should be able to afford to keep their other half who looks after the family. Average earnings are insufficient to meet the basic cost of housing, fuel and food.

Big Smurf,

Smurfland, United Kingdom,

50 minutes ago

They’re not ‘Stay at Home Mums’, they’re ‘Unemployed’.

katatomic,

dublin, Ireland,

45 minutes ago

Idiot

katatomic,

dublin, Ireland,

18 minutes ago

Idiot

Stevie H,

Wiltshire, UK,

53 minutes ago

Why are stay at home mothers complaining?
Let me make it clear to you again. This tax break is there to help working parents with childcare. Stay at home mothers don’t work, so don’t need childcare. Get it?

London Boy,

London, United Kingdom,

55 minutes ago

Not quite where the tax break for stay at home mothers comes from.

You work you pay taxes and contribute not sure what stay at home mothers contribute.

Maybe they want childcare to go out clothes shopping and go to coffee mornings.

You want a tax break give something back other than a burden on society.

Corinne,

Leeds, United Kingdom,

30 minutes ago

I am a stay at home mum and definitely do not expect any tax breaks. I do, however, object to being called ‘a burden on society’. I have never claimed any form of benefit, we live off my husband’s salary.
By me being at home, I am able to get all the shopping, cooking, cleaning etc done while my children are at school, enabling me to spend quality time with them in the evenings and weekends. Over the last few years, I have done voluntary work and have fundraised for charities. I help my friends/sister in law with childcare while they are at work.
Is this enough to convince you that being a stay at home mum does not automatically make someone a burden on society? I hope so.

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