February 6, 2013 9:57 pm

Top earners left out of childcare vouchers

Britain’s highest earners will be excluded from a new government scheme to help families pay for childcare after the Liberal Democrats insisted that top rate taxpayers should not receive any handouts.

Any parent who earns more than £150,000 will not be eligible for childcare vouchers, according to government officials, as the Treasury finalises a financial package of up to £1.5bn to help parents pay for the soaring cost of childcare. Families with young children could receive a tax break worth up to £2,000 per household.

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It is expected to replace an existing scheme, where employers can offer staff childcare vouchers worth up to £1,000 a year via salary sacrifice.

The financial support is part of a wider overhaul of the childcare sector in the UK. Elizabeth Truss, the education minister, last week announced that nurseries would be allowed to look after a higher ratio of children per adult if they employed better-qualified staff.

Both sides of the coalition are keen on the policy, aware that it will appeal to women voters and also lessen the sting of removing child benefit from parents earning more than £50,000.

The Conservatives believe the decision to exclude higher earners from the deal is just “window dressing” given that less than 1 per cent of the population are in the 50 per cent tax bracket. But the Lib Dems have insisted that the very richest in society should not benefit from any state handouts against the backdrop of swingeing welfare cuts.

Nick Clegg, the deputy prime minister, has also insisted on a separate support package to help those going into the new universal credit system, which comes into force this year given that the proposed childcare voucher scheme will not be available to parents who are unemployed or receiving tax credits.

“If we want to help the working families who struggle with childcare costs, as I do, then we don’t need to help people earning hundreds of thousands of pounds a year,” wrote Mr Clegg in a weekly email to supporters at the weekend. “But we do need to help families on middle incomes, especially those with very young children who don’t yet qualify for the free hours that start at three years old.”

The coalition also hopes more support for childcare will encourage more women back to work. British families spend an average 27 per cent of their income on childcare, the second highest proportion in the world after Switzerland, according to the OECD. This compares with a 12 per cent average across all advanced economies.

The UK ranks 16th in the OECD in terms of mothers going back to work, with 67.1 per cent of mothers in employment against more than 84 per cent in Denmark, 78.5 per cent in the Netherlands and 73.6 per cent in France.

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