A Bill to introduce “tax-free childcare” will be included in the Queen’s Speech on Wednesday as the three main parties seek to make the issue a critical one at next year’s general election.
The Coalition will push through legislation to help 1.9 million families with soaring childcare bills by providing state help worth up to £2,000 a year per child, funding 20 per cent of the cost up to £10,000 a year. The £750 million-a-year scheme will take effect in autumn next year, and all children under 12 will be covered within a year. It applies when both parents - or single parents - are in work.
Labour is planning a “big offer” on childcare in its election manifesto. Instead of cash help, Ed Miliband’s party has pledged to extend the amount of “free” childcare for three- and four-year-olds from 15 to 25 hours a week at a cost of £800 million annually.
Lucy Powell, the shadow Minister for Childcare and Children and Mr Miliband’s former deputy chief of staff, is pressing Labour to go further. Privately, Labour insiders admit that they would like to offer free universal childcare, but that it would cost billions and in the current financial climate looks more than a decade away. Childcare is likely to feature on Labour’s “pledge card” of a few key policies as Mr Miliband tries to boil down his “cost of living” campaign to a message that can be explained on the doorstep. Others could include a plan to freeze energy prices for 20 months; a possible freeze or cap on rail fares and a big boost to housebuilding.
Ms Powell is embroiled in a battle for the “hardworking parents’ vote” with Liz Truss, the junior education minister responsible for childcare, a rising Conservative star tipped for promotion when David Cameron reshuffles his ministerial team shortly. The struggle between two feisty, ambitious women could prove to be an important one.
Ms Truss is urging school nurseries to open from 8am to 6pm to help working parents juggle childcare, but critics say the move will not be backed by hard cash or by Ofsted inspections to ensure high quality provision.
The Childcare Bill will be a flagship measure for the Liberal Democrats. Although George Osborne has announced details in his last two Budgets, Nick Clegg has been heavily involved in shaping the Bill. “It is one of the measures we will look back on with great pride,” said a Lib Dem source.
However, independent analysts say that 80 per cent of the gains will go to people in the top half of the income scale. The cut-off point is an annual salary of £150,000, so a couple with a joint income of £300,000 would still qualify for state help.
Vidhya Alakeson, deputy chief executive of the Resolution Foundation think tank, welcomed the parties’ competition on childcare but said the rival plans build on one element of the existing system, without really reducing the complexity that makes it difficult to navigate for parents. She said: “While tax free childcare extends support to many families who are currently unable to access childcare vouchers, putting money directly in the hands of parents tends not to hold down prices which have risen greatly over the last decade.”
Ms Alakeson added: “Investing directly in subsidised places has a stronger international track record of delivering high quality, affordable childcare support, especially to those on lower incomes. However, as things stand neither proposal significantly addresses the quality deficit in childcare and there is still a big question as to whether existing spending [about £6 billion] could be used more effectively. Quality matters if we want childcare to have a positive impact on children’s development and get them ready for school, as well as supporting parents to work.”
A survey by the Family Childcare Trust in March found that many parents pay more for their children to be looked after - £7,549 a year for one child in a part-time nursery and another in an after-school club - than they pay in mortgages [£7,207 a year].
Childcare: What do the parties propose?
- Introduced 15 hours of “free” childcare for parents of three- and four-year-olds who have not started school, for 38 weeks of the year.
- From autumn 2015, parents will be able to claim back up to £2,000 a year in costs per child. For every 80p families pay, the Government will put in 20p up to a £10,000 annual limit. Will replace employer-supported childcare vouchers.
- Would increase the 15 hours of “free” childcare to 25 hours in £800 million scheme funded through higher levy on the banks.
- Legislation would ensure “wraparound” provision from 8am to 6pm in primary schools; some could club together to deliver it.
- Instrumental in ensuring two-year-olds from poor families are entitled to 15 hours of “free” childcare. The proportion covered will double to 40 per cent in September.
- Considering plans to extend “free” hours to one-year olds to fill the gap between the end of maternity leave and the two- year-old offer. But would be very expensive because of tight ratios and the additional facilities babies require.