The Government has announced proposals for a Tax-free Childcare scheme worth up to £1,200 per child. They say this will save a working family with two children under 12 up to £2,400 a year.
It will be phased in from autumn 2015, partly funded by the phasing out of childcare vouchers. and will ultimately be open to around 2.5 million families with children under 12. From the first year of operation, all children under 5 will be eligible, initially opening the scheme to 1.3 million families, and the scheme will build up over time to include children under 12.
To be eligible, families will have all parents in work, with each earning less than £150,000 a year, and will not already receive support through tax credits and later, Universal Credit. They will receive 20% – equivalent to the basic rate of tax – of their yearly childcare costs up to £6,000 per child.
It sounds like good news, so what’s the problem?
Well, first, you might ask is why this scheme is more than two years away. If it’s so important, why isn’t it being done now?
Secondly, while the Government is promising £750 million of support in 2015, it will also be cutting 10 times as much - £7 billion worth of support for families in 2015.
Thirdly, this scheme will not make up for families who have lost up to £1,500 in childcare support through cuts to tax credits. In total, this Government will have made £15 billion worth of cuts to family and childcare support between 2010 and 2015. This announcement won’t affect any of those cuts before 2015.
Finally, it will come as no surprise that at the same time as this government is giving massive tax cuts to millionaires, it is now introducing childcare support for families earning £300,000 a year at the same time as it is cutting Surestart schemes all over the country. It’s good to know we’re all in it together!