Budget 2014: Chancellor George Osborne to woo family vote with a £2,000 childcare sweetener

 

The Government will help 1.9 million families with childcare costs by providing up to £2,000 per child each year, George Osborne will announce in the Budget tomorrow.

The Chancellor will expand and speed up a £750m-a-year “tax-free childcare” scheme he proposed in last year’s Budget in a significant boost for low and middle-income families. Originally, the Coalition planned to provide up to £1,200 per child per year – by meeting 20 per cent of childcare costs up to £6,000 a year per child. The new limit will meet 20 per cent of bills, up to £10,000 a year.

The programme will start in the autumn of 2015 and cover all children under 12 within a year. Under the original plan, it would have been phased in over seven years.

Budget 2014 LIVE

The Coalition’s move will ensure that childcare becomes a key issue at next year’s general election. Labour has already promised 25 hours a week of “free” provision and to provide £1,500 per child annually – a figure Mr Osborne will now trump. A recent survey showed many families are now paying as much in soaring childcare bills as they do on their mortgage.

Mr Osborne’s scheme will help households with two parents working unless they are a single-parent family. Couples where neither parent earns more than £150,000 will qualify.

Ministers hope the more generous scheme will allay fears among Conservative MPs that the Budget will not do enough for the party’s natural middle-class supporters. The Chancellor is resisting backbench demands to raise the starting rate of the 40p tax band, which will bite on incomes of £41,866 a year from next month.

Mr Osborne will insist that his childcare proposal will help those on low incomes as well as the “squeezed middle”. To encourage parents to return to work, he will announce that the Government will meet 85 per cent of childcare bills for people on universal credit, up from the 70 per cent announced a year ago.

He will also pledge £50m of extra help for three- and four-year-olds from disadvantaged backgrounds through a new “early years pupil premium”,  enabling providers to employ more highly qualified staff.

The new system will replace employer-based childcare vouchers and help twice as many people.

Parents will set up online “tax-free childcare accounts” run by HM Revenue and Customs and National Savings  and Investments. Working families earning at least £50 a week will qualify, allowing part-timers and the self-employed to benefit.

David Cameron, who will trumpet the scheme with Nick Clegg today, said last night: “It will help millions of hard-pressed families with their childcare costs and provide financial security for the future.”

The 4Children charity welcomed the higher payments but said: “ Many parents will still have to find up to £8,000 for childcare each year.”

Lucy Powell, the shadow Children’s minister, said: “David Cameron has cut support for children and families by £15bn since he came to office. And today he confirms that no help will arrive until after the election. This is too little too late.”

Labour will argue that the real test for the Budget is whether it will narrow the growing north-south divide. Michael Dugher, a member of the shadow Cabinet, said: “David Cameron is a divide-and-rule politician who has inherited a collapse in support for the Tories up north and runs a party that simply does not understand northern voters.”

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