David Cameron and Nick Clegg were this morning falling over themselves to claim the credit for helping “hard working families” with news of a new voucher scheme that could be worth up to £1,200 per child.
After weeks of wrangling, the coalition was finally ready to press the button on a tax-free childcare scheme to replace the current “employer supported childcare” system. The new scheme will eventually reach up to 2.5m families – compared with the 450,000 who access the current voucher system – and include the self-employed.
Clegg said:
An extra 1,200 for each child will make a real difference to families who find themselves constantly worrying about how to juggle their family budget
Cameron added:
It will be one of the biggest measures ever introduced to help parents with childcare costs.
But does the new scheme really live up to its billing? One expert in this area told me last night that expanding the scheme is a big plus. But on the downside, it does not actually mean more money for the typical two-children family on average wages. My source said:
At the moment a two-earner household both on basic rate and one child would save £1,800. The saving works out to be approximately 33 per cent — 20 per cent tax relief plus 12.5 per cent national insurance relief. The new scheme is only 20 per cent of costs up to £6,000 – so only £1,200.
What’s worse is that higher rate earners currently save £630 each – their national insurance relief is only 1 per cent – so they will actually be better off under the new scheme. Hardly the sort of progressive support Clegg was after.
What’s more, while the Lib Dems insisted those earning £150,000 are not allowed to claim vouchers, a two-earner household earning £290,000 a year can. It will be a tiny fraction of people who fall into that camp, but it is galling nonetheless and will no doubt be seized on by the press to attack the scheme.
Jim Pickard
Kiran Stacey