Childcare reforms ‘will help richest families’, warn Government advisers

Campaigners say Coalition must tackle ‘in-work poverty’

Ministers have been urged to rethink their plans to help families with the soaring cost of childcare because they will benefit couples with a joint annual income of up to £300,000 while reducing support for poorer people.

The Government’s advisers on child poverty have warned that proposals to bring in 20 per cent tax relief on childcare,  worth up to £1,200 per child per year from 2015, will subsidise the better off and create a two-tier system. They are proposing a lower £120,000 cap on the income of dual-earner families who qualify, with the money saved switched to low income families in work.

The Coalition’s plan will help families with all parents in work, if they each earn less than £150,000 per year and do not already receive support through tax credits or the current employer-supported scheme.

Alan Milburn, chairman of the Commission on Social Mobility and Child Poverty, told The Independent: “It's welcome that the UK is seeing signs of economic recovery but social recovery needs a labour market where work always pays.

“Affordable childcare is key. But the Government’s proposals put taxpayers’ money in the wrong place. Subsidising the childcare  of families with earnings of up to £300,000  is the wrong priority when low income families in work have had government support for their childcare costs cut from 80 to 70 per cent. The commission believes a fairer, simpler deal is needed. By making childcare more affordable, work incentives would be strengthened.”

Mr Milburn, the former Labour Cabinet minister, said the proposals  his commission has sent to the Government would not cost taxpayers a penny more. He urged George Osborne to use his Budget in March to “put right what he got wrong” by switching resources from better-off families to the less well-off.  

With two-thirds of children in poverty in 2011-12 living in working households, Mr Milburn warned that Government will not eradicate poverty unless it gets to grips with “in work poverty.”

His blueprint would reverse the Coalition’s £580m cut in the proportion of childcare costs funded by tax credits for low income families, down from 80 to 70 per cent, costing a two-earner couple up to £1,560 a year. He wants all families receiving universal credit, which will replace tax credits, to have 85 per cent of their childcare costs covered by the state, leaving them £2,350 a year better off.

The former Health Secretary warned that 80 per cent of the benefit from the £750m of “tax free childcare” announced in the Budget last March would go to better-off families. It would provide most help to those in the top half of the income scale who do not qualify for tax credits, which top up the earnings of the low paid.

Mr Milburn warned that low income families with more than two children could be disadvantaged by the Coalition’s plans. This echoes the controversial proposal to limit child benefit to the first two children floated last month by Nadhim Zahawi, a Conservative MP and member of the Downing Street policy board.

The Milburn commission said maximum eligible childcare costs through tax credits  will continue to be capped at £300-a-week for those with two or more children, so it will be very difficult for parents with more than two children to make work pay. But under “tax free childcare”, maximum eligible costs will be the equivalent of £115-a-week for every child with no maximum limit.

Mr Milburn also urged a rethink over plans for two levels of support to people on universal credit –with 70 per cent childcare costs met if they earn just below the personal tax allowance and 85 per cent if they earn just above it. He warned that this  new “cliff edge” would create  a narrow “sweet spot” where work pays, and working a few more hours would mean hitting the weekly cap on childcare support. It would mean that some people lose their gains from taking a job or working longer hours and undermine attempts to simplify the system.

The commission expressed concern that support through tax credits will be the same in cash terms in April 2016 as it was in April 2005, even though childcare costs are expected to rise by 80 per cent over the period. It said this poses real problems for the work incentives of people living  in high cost areas such as London. It also warned that the support through universal credit could be funded through future welfare cuts signalled by the Chancellor, which could result in many of the apparent beneficiaries losing out from the total package.

Ministers insist their new plans will help the “squeezed middle” rather than the rich and that they  have listened to critics by announcing £200m of extra childcare support for low-income families through universal credit from April 2016. This will fund an increase in the proportion of childcare costs from 70 to 85 per cent where all parents in a household are in work and earn above the personal tax allowance.

The Government will finalise its proposals early in the new year after a consultation exercise.

 

News
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Life and Style
food + drink
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
tv
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
life
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Primary teaching roles in Ipswich

£21552 - £31588 per annum: Randstad Education Cambridge: Randstad Education re...

Science teachers needed in Norwich

£21000 - £35000 per annum: Randstad Education Cambridge: Science teachers requ...

Semi Senior Accountant - Music

£30000 - £35000 per annum: Sauce Recruitment: A successful, Central London bas...

English teachers required in Lowestoft

£21000 - £35000 per annum: Randstad Education Cambridge: Qualified English tea...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits