Financial help, from cradle to creche

Employee perks: nursery vouchers make a difference, but there are flaws

House of Commons staff will be listening as attentively as MPs to this Tuesday's Budget statement. For the House of Commons is one of 200 employers in the UK which give out vouchers to help working parents with child-care costs. Other employers which use the scheme include British Gas, the accountancy firm Price Waterhouse and the National Audit Office. Employees will be keen to learn whether the Chancellor will, at last, make this "benefit-in-kind" tax-free.

Launched in 1989, Child Care Vouchers is part of the group which distributes luncheon vouchers. It also belongs to Trac (Tax Relief And Childcare), which is lobbying for an end to an anomaly opened up in 1990.

"We want to have child-care vouchers and, indeed, all other forms of company-funded child-care treated in the same way as workplace nurseries. In 1990, only employees who received benefit in the form of a workplace nursery were exempted from tax on the value of that benefit," says Steven Stanbury of Child Care Vouchers. The typical pounds 35 a week paid out in the form of child-care vouchers is taxed at the recipient's highest rate of income tax.

"The Government chose to incentivise workplace nurseries because they thought that was what companies wanted. But the figures show that in six years there has not been a significant increase in the number of subsidised workplace nursery places.

"Workplace nurseries are expensive to set up. And employees don't always want them, particularly if they have to commute some distance to work. They often prefer the option of having a child-care arrangement closer to their home."

Vouchers are much more flexible, and can be redeemed with any registered child carer including child minders, creches and nurseries, In addition, they can be used to pay live-in or daily nannies and also members of an employee's own family (but can't be used to pay a neighbour who is not registered with the local council).

But some employers do run highly successful workplace nurseries. Midland Bank saw a dramatic rise in the number of women returning to work after maternity leave when nursery facilities were introduced. In 1988, 70 per cent of women who took maternity leave did not return to work. The bank was concerned at the loss of skilled and experienced people in whom a substantial investment had been made. Now, 80 per cent of women return.

Midland opened the first of its nursery facilities in 1989. Around the country it has 800 nursery places for employees of the bank and its subsidiaries. A quarter of those places are in three nurseries wholly owned by the bank. The rest are found in 100 partnership nurseries. These nurseries are joint ventures with, mainly, public sector employers such as the civil service, the National Health Service and education and local authorities.

The charge to employees who use the nursery facilities varies, but Midland subsidises 40 to 50 per cent of the running costs depending on the location. Crucially this benefit-in-kind is tax-free.

The problem with employer- run workplace nurseries is that they are most likely to appeal only to larger employers, says Colette Kelleher, director of the Daycare Trust.

The trust welcomed an extension to pounds 60, in last year's Budget, of the child-care disregard. This helps low-income families by disregarding child- care costs of pounds 60 when assessing someone's income for eligibility to benefits, including family credit, council and housing benefits and disability working allowance. But the trust wants eligibility qualifications simplified and the pounds 60 figure applied to every child, not to the whole family. It would also like the scheme extended to students who qualify for income support.

Child-care disregard has worked well for the 23,000 families who claim it, 95 per cent of whom are lone-parent families. But in 1994 the Government predicted that 150,000 families would benefit. Ms Kelleher says: "To sum up, there is a measure of help for very low income families and there is some help from some employers. But there is a huge group in the middle, particularly lower and middle-income families, for whom there is no help with child-care costs."