Budget 2013: Chancellor George Osborne has confirmed that the current childcare voucher scheme will be replaced by a new tax-free childcare scheme for working families.
The change, which will come in from autumn 2015, will see the government provide working families with 20% of their childcare costs, up to £1,200 for each child.
This is equivalent to basic rate tax relief on childcare costs up to £6,000 a year.
From 2015, employers will no longer be responsible for providing employees with childcare vouchers, though the tax exemption available for workplace nurseries will remain.
The government will consult shortly on the detailed design and operation of the tax-free childcare scheme, including on how employers can continue to play a role in supporting their employees with childcare costs.
Any money channelled towards struggling working parents to help fund their childcare costs is very welcome, however the Chancellor’s Budget has delayed this much needed help for a further two years, and raises questions over how substantial an improvement it actually represents.
For example, an ‘average family’ with two children – one in school, one in nursery – where both parents earn within the lower tax bracket, will save just over £100 per year under the new changes. As childcare costs continue to rise over the next two years, this saving will diminish further.
Furthermore, the changes proposed by the government today take the responsibility of implementing childcare voucher schemes out of the hands of employers. This takes away the tax benefits that businesses enjoy and marginalises the role that they play in making childcare vouchers available, and hassle-free, to working parents. Instead, under the measures proposed today, the onus will be on parents not just to be aware of their rights and entitlements, but to take on the mantle of administrating a voucher service that is yet to be fully explained by the government.
The deferral until 2015 means any real action on childcare will not be taken until after the next election, but urgent action is needed now. There are a number of moves that the government can still make today – moves with minimal impact on budgets and maximum impact on working parents.
More than 18 million employees (80% of the working population) have access to the current childcare voucher scheme, and simple measures such as raising the cap on the maximum amount available per parent and extending the vouchers to the self-employed can make all the difference.
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