Anger over plans to scrap childcare vouchers

20 October 2009

Nine former MPs have warned the government not to scrap tax breaks on childcare vouchers, following more than 76,000 people signing a petition on the Prime Minister’s website.

These vouchers enable working parents to use £243 of both their pre-tax income to buy childcare vouchers. Because this money is free of income tax and national insurance, parents receive a tax break equivalent to 31% if they are basic-rate taxpayers, or 51% if they pay the higher rate of tax.

However, during his speech at the Labour Party Conference, Gordon Brown told delegates that he wanted to reform the tax relief on this initiative in order to fund free childcare for a quarter of a million low-income families.

It is expected that the chancellor Alistair Darling will confirm the scheme will close to new entrants after 2011, and tax relief scrapped for all from 2015, in the forthcoming pre-Budget Report on 9 December.

According to the Guardian, mine former ministers have now written to Brown, warning him that he risks axing popular support for hard-working parents - all too crucial in the round up to the general election.

The ministers, including Patricia Hewitt, Estelle Morris, Hilary Armstrong, Beverley Hughes and Caroline Flint, say the plans to cut childcare vouchers for more than 340,000 parents are "greatly unfair" and "mark the undoing of one of Labour's landmark achievements".

The move has also been met with angry protest from parents, many of whom believe the tax-efficient vouchers mean the difference between mothers returning to work or staying at home.

A petition on the Prime Minister’s website has attracted 76,468 signatures since it was submitted at the end of September – making it the largest petition on the website.

Mrs Dee Atkin, who submitted the childcare voucher petition, writes: “The UK lags behind the rest of Europe when it comes to helping working parents and this move would be a further step backwards.

"Penalising working families to help other families go back to work makes no sense at all. If you're a working parent finding it hard enough with childcare vouchers, let alone without, please let Gordon Brown know that you do not agree with his plans by signing this petition.”

The government justifies the move by saying the money saved will be used to extend free nursery places.

Writing in response to the petition, Brown also argues that tax relief is currently "badly targeted".

"Around a third of the benefit for employer supported childcare goes to the 6% of parents who pay tax at the higher rate," he says.

About childcare vouchers

Childcare vouchers can save parents up to £1,195 per parent on childcare costs, according to provider Childcare Choice. Employers also benefit, as they pay a lower amount of employer national insurance.

Each parent can only claim up to £243 a month, regardless of the number of jobs they have. However, you can choose to claim vouchers for more than £243 each month, although you will have to pay tax and national insurance on any amount above this limit.

Parents claiming childcare vouchers do not have to use them in the week or month they are issued - you have the option to save these up and use them at a later date, such as the school holidays. It is up to parents to check whether their childcare provider accepts vouchers.

Employers are not required by law to provide employer-supported childcare to their employees. 

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