Parents' tax relief has failed, admits Hewitt

Patricia Hewitt, the Trade and Industry Secretary, admitted yesterday that one of the Government's flagship schemes to help mothers go back to work had failed.

The childcare tax credit, which was described by the Chancellor when it was launched in 1998 as a way of making child care "affordable to the many and not the few", has only been taken up by 138,836 families in England.

Mrs Hewitt admitted yesterday that the tax credit scheme, which gives cash incentives to parents who send their children to childminders or nurseries, was not having "the transforming impact it could have or should have".

The minister, who has led programmes helping mothers get back into employment while making it easier for both parents to work part-time, said take-up of the credit was "a drop in the ocean". She suggested working parents should be given more choice about how their children were looked after.

"We have to recognise that parents will choose different kinds of child care, others will use a childminder or a nanny, others would prefer to have somebody in their own home and what we need to do is look at why the childcare tax credit isn't reaching more families," she said. "We need to expand its scope."

The Treasury had claimed that the tax credit would help mothers on low incomes get back into work. People with one child, earning up to £22,000 a year, and those earning £28,000 with two or more children can claim the credit. In April the thresholds will be raised to allow more people to claim. Those earning up to £27,000 will qualify if they have one child and those earning up to £42,000 if they have two or more children.

The Treasury said yesterday that 160,000 people had taken up the credit and more families were benefiting than under the equivalent Tory system.