Government plans to help parents struggling with rising child care costs are on the 'wrong track'

Government plans to help parents struggling with rising child care costs are on the “wrong track” because they could help better off families most, a think tank warns today.

The Resolution Foundation said the Chancellor George Osborne’s proposal to provide tax relief for nurseries and childminders would subsidise well-off at the expense of those on lower and middle incomes.

Nick Clegg, the Deputy Prime Minister, is arguing for more “free” state-funded hours of child care for lower earners as the Coalition parties thrash out a new package due to be announced in the next few weeks.

Gavin Kelly, the foundation’s chief executive, said: “It’s not a great surprise that the Coalition isn’t finding it easy to agree its new policy. It’s trying to resolve contradictory political pressures – from using some form of tax relief to compensate higher income families for their axed child benefit, to ensuring that it will be worthwhile for low income families relying on  Universal Credit (phased in from this year) to  take on more hours of work, to relieving the burden on middle income families who don’t qualify for tax credit support.  Achieving all of these objectives with limited resources at the same time as  simplifying the current system of childcare support, as the government says it wants to, is a very tall order.  There is a real risk they go down the wrong track - prioritising a tax break that gives the most to the affluent.”

The think tank, which hosts a conference on child care today, found that the existing scheme under which employer vouchers provide tax relief gives almost half the benefit to households with an income of more than £70,000.

Anand Shukla, chief executive of the Daycare Trust, said: “It is key that any additional financial support helps those on low and modest incomes where the financial pressures are the greatest. Rather than a tax break which threatens to be complicated and onerous, we strongly advocate targeting any extra resources on extending the free entitlement provision which is hugely popular with parents.”