Childcare plan 'up for consultation'

4 August 2013 Last updated at 08:04 ET

Plans to introduce a childcare voucher system are expected to be put out to a 12-week consultation on Monday.

Under the scheme, families with two working parents earning less than £150,000 each would be able to claim back up to £1,200 a year per child.

The government has said the scheme, which was first announced in March, will benefit 2.5m working families.

Labour said the government had already taken support away from parents and the plans proved it was "out of touch".

Begins in 2015

The UK has some of the highest childcare costs in the world, with many people with two or more children saying it does not make financial sense for both parents to work.

When the scheme was announced, Prime Minister David Cameron said the plans, expected to cost £1.4bn, would be a "boost direct to the pockets of hard-working families".

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How the new scheme will work

Parents will be able to open an online voucher account with a voucher provider and have their payments topped up by government.
For every 80p families pay in, the government will put in 20p up to the annual limit on costs for each child of £1,200.
Parents will be able to use the vouchers for any Ofsted regulated childcare in England and the equivalent bodies in Scotland, Wales and Northern Ireland.
The scheme will initially only be open to pay for children under five
The scheme is expected to benefit 2.5 million families.
Parents using the existing childcare voucher system will be able to continue using that scheme instead
Full details of the new scheme will be proposed in a consultation before being finalised.

But some said it would penalise stay-at-home parents.

Deputy Prime Minister Nick Clegg was accused of unfairly targeting "stay-at-home mums" by a caller to his weekly radio phone-in on London's LBC radio.

Details of the scheme will be set out following the consultation, but the new system is expected be phased in from autumn 2015, with children under five helped in the first year. The scheme will then build up over time to include all children under the age of 12.

To be eligible for the new support both parents will have to work - or the one parent in the case of lone parent families - and each parent must be earning less than £150,000 a year.

In two-parent families where one parent does not work, families will not receive support.

Half of the funding for the new scheme will come from the abolition of the previous system of employer-supported childcare vouchers, and in part by funding switched from elsewhere in Whitehall.

'Costs spiralling'

The government said it expected the new tax-free childcare scheme to eventually help 2.5 million working families.

It said that was significantly more than the current employer-supported childcare voucher scheme, which is provided by only about 5% of employers.

Sharon Hodgson, Labour's shadow minister for children and families, said: "Only David Cameron's government could be so out of touch that they expect families to be grateful for help with childcare in 2015 when they've already seen costs spiralling and support taken away.

"This government has hit hardworking parents. Families with two children have already lost up to £1,500 in childcare tax credit.

"This government promised to be the most family friendly ever but hardworking parents have lost out while millionaires get a tax cut."

Tax-free childcare: Examples for two-child families
Earners	Annual claim back limit	Details
Source: HM Treasury KEY: Orange figures represent individuals not eligible for tax credits/universal tax credit. Green figures represent individuals eligible for tax credits/universal tax credit.
One income of £120,000, one of £80,000	£1,200 per child	Two parents working full-time with annual salaries up to £150,000 each will be entitled to claim back 20% of childcare costs, with a maximum of £1,200 per child aged under 5, eventually rising to under-12s.
Single parent earning £60,000	£1,200 per child	A single parent working full-time, who does not qualify for tax credits or universal credit, earning up to £150,000 will be entitled to claim back 20% of childcare costs, with a maximum of £1,200 per child.
One income of £60,000	£0	If one parent works and the other does not, and the family does not qualify for tax credits or universal credit, they will not be able to claim.
Two incomes of £12,000 each	85% of childcare costs	Two low-income workers who qualify for tax credits or universal credit and earn over the income tax threshold (set to be £10,000) will be able to claim 85% of childcare costs. The same applies to single parents.
One income of £12,000, one of £8,000	70% of childcare costs	Families where both parents work, who qualify for tax credits and universal credit and one parent earns above the income tax threshold (set to be £10,000) and the other does not, will be able to claim 70% of childcare costs.