Inquiry demands £440 tax credit for parents

Commission recommends financial help for parents with toddlers and tax perks to encourage employers to help with child care

Parents of children under 16 should be given tax relief of up to £440 a year to help with the cost of child care while they are at work, an independent commission said yesterday.

Parents of children under 16 should be given tax relief of up to £440 a year to help with the cost of child care while they are at work, an independent commission said yesterday.

In the first three years of a child's life, parents should also receive "generous financial support" through the tax and benefit system so that they have a choice over whether to work or stay at home.

The Child Care Commission said its proposals aimed to help many working parents "who feel they are on a treadmill" trying to balance spending time with their children and earning enough to keep the family. Couples would have more freedom to decide when or if either partner returned to work after having a child because financial help would be directed at the most difficult years, when children were under three.

Harriet Harman, the former social security secretary who chaired the commission, accepted the plans had not been costed but said it was time for child care to be raised much higher on the political agenda in Britain, where people work the longest hours in Europe. "This area needs to take its place as a recognised priority alongside transport, hospitals and schools. It will require new investment and a new focus for public policy," she said.

The radical measures include tax relief, at the basic rate of 22 per cent, on up to £2,000 of childcare expenses each year. The £440 handout would help offset an average £5,000 annual bill for child care for a family with two children.

Generous help for parents of children under three should include higher child benefit, a toddler tax credit to help low and middle-income families, and or a transferable tax allowance allowing a working parent to use their stay-at-home partner's personal tax allowance. Under each option, parents would be free to use the money to fund professional child care, pay relatives or to look after their children themselves.

Treasury officials estimated the plans would cost several billion pounds, with tax relief on child care costing more than £1bn a year alone. A spokesman said last night the Chancellor had already promised more help for parents in the next Budget, including another increase in child benefit. "We will look carefully at the proposals but we also have to look carefully at the costs."

The report said every neighbourhood should have a children's centre. That would mean between 8,000 and 10,000 centres, of which 6,000 to 8,000 would have to be founded.

It said employers should be encouraged to offer child care through greater incentives and simplification of the tax system. Parents should have the right to return to work 12 months after the birth of a child, rather than the current six months. A Department of Work and Family Services should be created to streamline policies handled by seven departments.

The Tory MP Edward Leigh, a member of the 13-strong commission who has six children, said the report recognised for the first time that parents should have a choice over whether to work or stay at home. "What we are talking about is a very humane solution."

The report was welcomed by parents struggling to find or afford child care. Penelope Parker, who lives in south London with her husband and five-year-old son, said she had only been able to look for work as a graphic designer in the past few weeks because an after-school club had opened near by.

The family moved two years ago from America, where Mrs Parker had paid the equivalent of £50 a week for full-time nursery care. Here it costs £150. She said: "When we came here I couldn't find a full-time job that paid well enough to afford day care or a nanny. I couldn't afford long-term day care at the quality I really wanted."