THE BLOG

Chancellor - Childcare Can Help Level the Playing Field and Create a Strong Incentive to Work... But It's Not Doing So Yet

16/03/2016 09:37 GMT | Updated 17/03/2017 09:12 GMT

Childcare is a critical part of modern infrastructure. As vital in getting parents into work as any train line or motorway, yet we don't hear the same long-term, national rallying calls for similar levels of investment.

The benefits of investing in good quality childcare are numerous. First, social mobility - supporting children's development in the vital early years can reduce the striking attainment gap too often prevalent between the children of higher and lower income families as they start school.

Second, gender equality - in our recent inquiry Britain's Families Thriving or Surviving, parents across the country told us that while they could see equality in the workplace had moved forward, equality at home lagged far behind. With caring responsibilities usually falling on mums, childcare has a real impact on women's careers - and as such can be a major factor in the shameful and stubborn gender pay gap.

But childcare is also about family finances. Countless families told us costs were unmanageable and wiped out any additional income they could earn from working. While the government's 30 hours childcare pledge for parents of 3 and 4 year olds working more than 16 hours a week is a welcome step in the right direction, we are worried about low income families who do not stand to benefit most from the increase.

In Wednesday's budget, we're therefore asking the Chancellor to make one small but important change by looking seriously at the childcare element of working tax credits. We would like to see the maximum amount parents can claim for childcare, as part of Tax Credits and later Universal Credit, increase by at least the rate of inflation every year.

Currently, eligible parents can get help with up to 70 per cent of their childcare costs through Tax Credits but the amount they can receive is capped. If a family has one child, the maximum cost allowed is £175 per week (meaning that in practice they can claim up to £122.50), and if they have two or more children the maximum is £300 per week (meaning that in practice they can claim up to £210). That amount has not kept up with prices. In fact, it has not increased since April 2005. What that means for families is brought into stark reality when we look at the cost of childcare over the same period, which, according to the Family and Childcare Trust, has increased by over 60%.

The parents who would benefit most from this change are those on low incomes but with high childcare costs - these are exactly the people who will come under the most pressure to stop working as a result of rapid increases in childcare prices.

If the Chancellor commits to increase the maximum amount families can claim for childcare through Tax Credits by at least the rate of inflation each year, he will not only show his support for hard working parents doing the best for their families, he will also remove a strong disincentive on them to continue working.