Budget 2013: low-paid working families 'will not qualify for full childcare support'

Think tank finds only four in 10 low-paid families will see 85 per cent of their childcare bill met by the Government

The majority of low-paid working families will not qualify for the full amount of state help towards their childcare costs promised in the Budget, according to the first study of its impact.

The Resolution Foundation think tank found that only four in 10 low-paid families will see 85 per cent of their childcare bill met by the Government.  The findings into question George Osborne’s pledge yesterday that the help for people relying on tax credits will be more generous than at present, and will fuel criticism that his package aids the middle classes more than hard-up families.

Until now, most attention has focused on the announcement on Tuesday that working parents would qualify for 20 per cent tax relief on childcare costs, up to a maximum of  £1,200 a year for each child from 2015.  This will benefit the better off.

Outlining his £1bn plan, the Chancellor said: “To the working parents struggling with the costs of childcare, and the mother wondering whether it makes financial sense to get a job, we offer this: tax free childcare.  New tax-free childcare vouchers for working families: 20 per cent off the first £6,000 of your childcare costs for each child.  And increased childcare support for those low income working families on universal credit.”

The Government has provided £200m  for low income families, so that 85 per cent of their childcare costs would be met under the new universal credit from 2016 — more generous than the 70 per cent under existing tax credits.

But the foundation’s analysis shows that 564,000 low income families (38 per cent) will see 85 per cent of their childcare bills covered but more than 900,000 (62 per cent) would receive only the current 70 per cent— the rebate which applies when one or both parents earn too little to pay income tax. It warned that many part-time workers will miss out.

Vidhya Alakeson, the foundation’s deputy chief executive, said: “Only a minority of working families in universal credit with children – 40 per cent at most – will be eligible for the new 85 per cent rate of childcare support.  The rest have someone in low-paid, part-time work and so won’t benefit.  It is completely wrong that these working families will be excluded from new support at a time when families on up to £300,000 will benefit from childcare vouchers.”

She added: “The Government should be applauded for attempting to help families struggling with the costs of childcare but the truth is that those who are struggling the most are missing out.  We are left with a complex two-tier system of childcare support within universal credit that gives less support to the least well-off.”

The think tank found that just under a third of working families on universal credit with children under five – 164,000 out of 524,000—will qualify for the extra support promised by Mr Osborne.

Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: “Recognising the burden of childcare costs is a start, but the extra help in the new tax-free childcare policy barely benefits those on the low incomes, nor makes up for the shortfall from previous cuts to childcare tax credits.  Knowing support is coming in three years’ time provides little comfort for those who are struggling to make it through to the end of the week. With cuts to benefits and tax rises around the corner, the struggle for millions of poor families shows no sign of relenting.”

The  new scheme will benefit only those two-parent families with both parents working,  and single parents. This led to criticism from Conservative MPs that the Government has neglected stay-at-home mothers.

Start your day with The Independent, sign up for daily news emails
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appeal
Arts and Entertainment
Strictly finalists Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridge
tvLive: Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridgeface-off in the final
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
Have you tried new the Independent Digital Edition apps?
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
The Tesco Hudl2: An exceptional Android tablet that's powerful, well-built and outstanding value

Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Finance Director

£65000 - £80000 per annum: Recruitment Genius: Finance Director required to jo...

Recruitment Genius: Medico-Legal Assistant

£15000 - £25000 per annum: Recruitment Genius: This is a unique opportunity fo...

Ashdown Group: (PHP / Python) - Global Media firm

£50000 per annum + 26 days holiday,pension: Ashdown Group: A highly successful...

The Jenrick Group: Quality Inspector

£27000 per annum + pension + holidays: The Jenrick Group: A Quality Technician...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas