Childcare costs: working parents to get £1,200

The new tax-free scheme, which will replace the existing employer-supported childcare programme (ESC), will be introduced in late 2015 – after the next general election.

The benefit will be available to families where both parents work – or one parent in the case of single parent families – and where each parent earns less than £150,000 a year. Parents on a joint income of £300,000 will still be eligible.

It will be funded by £750m made available from the budget, and by cutting the ESC, claimed by 450,000 families.

Under the scheme, eligible families will receive 20 per cent of the annual cost of childcare up to £6,000 – up to £1,200 for each child.

Both Nick Clegg and David Cameron will announce the new scheme today on the eve of the budget, with both wanting to benefit from what they believe will be a popular scheme aimed at making it more profitable for parents to work, and making work pay.

But Labour said that the proposed plans would not benefit families for another two and a half years.

To begin with, parents will be helped with the costs of each child up to five years old, and over time will include children under 12.

A recent report into chilcare costs found that the cost of nursery fees has almost doubled in the last decade, costing families an average of £11,000.

Ministers say that to start with, 1.3 million families will benefit – compared to 450,000 under ESC – eventually rising to around 2.5 million. It is still unclear whether the new scheme will put more money in working parents’ pockets that the current voucher scheme.

‘Boost’ to families

David Cameron said: “Too many families find paying for childcare tough and are often stopped from working the hours they’d like.

“This is a boost direct to the pockets of hard-working families in what will be one of the biggest measures ever introduced to help parents with childcare costs.”

Deputy Prime Minister Nick Clegg added: “The rising cost of childcare is one of the biggest challenges parents face and it means many mums and dads simply can’t afford to work.

“This not only hurts them financially, but is bad for the economy too.”

But William Higham, director of UK policy at Save the Children said that any investment in childcare is welcome, but that it should prioritise helping parents on lowest incomes, into work.

“A policy that doesn’t benefit struggling families until 2016 will mean another three years of juggling costs amidst a deep recession. Some parents will be unable to work until that comes into force,” he said.

“Parents tell us that they are desperate to take jobs, but the costs of childcare are crippling. Prioritising those families on lower incomes to find work would be a win-win situation – for both the economy and our country’s children”.