Labour accused of U-turn on care vouchers

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Child care campaigners yesterday accused Labour of a U-turn on its manifesto commitment to support wider tax exemptions after it opposed a Finance Bill amendment on child care vouchers given by employers.

Alan Beith, Liberal Democrat Treasury spokesman, who tabled the amendment during last week's all-night sitting of the Finance Bill, said: 'John Smith's election budget explicitly committed Labour to extend tax exemptions to all forms of employer assistance with child care. Indeed, this pledge formed part of Labour's costed budget proposals.'

The amendment, backed by the Campaign for Tax Relief and Childcare, an umbrella organisation for family and employer groups, aimed to exempt vouchers for use in private nurseries, or with registered childminders, from being taxed as a benefit in kind. It proposed an exemption from standard rate tax on vouchers worth up to pounds 75 a week in respect of children aged up to five and pounds 1,500 a year for those from 5 to 16. A further amendment proposed similar exemptions for the self-employed.

Workplace nurseries were given tax exemption in the 1990 Budget. But Anthony Nelson, Economic Secretary, told the committee that the exemption was deliberately narrowly focused to encourage employers to provide nurseries, not to open the way for more general tax relief for child care costs.

Paul Boateng, Labour MP for Brent South, said vouchers were no substitute for direct state funding, did not help low-paid women (those earning less than pounds 8,500 a year are not taxed on benefits in kind) and would not create a single new child care place. The in- built Tory majority on the committee means the amendment stood little chance of success. But the campaign, which has the support of groups including Gingerbread, the National Council for One Parent Families, the Association of Independent Businesses and the Working Mothers' Association, had counted on Labour support for the principle.

Stephen Stanbury, the campaign director, said: 'It is certainly a limited measure. Nobody is saying it's the be all and end all of child care provision. What we are saying is that it is a very important part of the overall picture and a way of encouraging more provision. The way to do that is to put vouchers on the same footing as nurseries. If they are made tax exempt more employers would start to provide them.'

Voucher schemes are administered by two companies, Childcare Vouchers Ltd, part of the Luncheon Vouchers concern, and Childcare Cheques. Beneficiaries include workers at British Gas, Forte Hotels, Debenhams, BMW UK, National Power, Peat Marwick, the accountants, the National Audit Office, the watchdog on government spending, and a number of health and local authorities.