Two million families will be offered up to £2,000 a year of state help per child towards the costs of care, David Cameron and Nick Clegg will announce on Tuesday.
The scheme will be worth up to £2,000 per child per year when it launches in autumn next year – £800 more than the £1,200 originally proposed. It was only expected to apply to children under the age of seven, but parents will now be entitled to the money until their son or daughter’s 12th birthday.
Nearly two million families could benefit from the scheme – twice as many as the present voucher scheme, which is only available where adopted by an employer. David Cameron said the policy, which effectively covers 20% of childcare costs up to a maximum of £10,000 a year, would help “hard-pressed families” and “provide financial security for the future”.
However, it has been criticised for excluding couples where one parent does not work and for applying to richer households with incomes of up to £300,000. the Family and Childcare Trust said parents now spend more on part-time childcare than their mortgage repayments.
The Prime Minister is due to unveil details of the package during a joint appearance with his deputy Nick Clegg, who added: “We want to ensure everyone can get on and succeed.” Labour’s Lucy Powell, the shadow minister for children, said, “The proposals were too little, too late. Mr Cameron has cut support for children and families by £15bn since he came to office. This Government has done nothing in this Parliament to help parents experiencing a cost-of-living crisis.”
As well as the childcare tax break, the Government is to give an extra £50m to nurseries looking after the most deprived three and four-year-olds. Families claiming Universal Credit will also have 85% of their childcare costs met, up from 70%.
The announcement comes as the Chancellor prepares to unveil this year’s Budget. George Osborne, who will set out the Government’s spending plans for 2014-15 next Wednesday, has warned of difficult decisions to come.
Full-time childcare costs for a family with a two-year-old and a five-year-old are estimated at £11,700 a year by the Family and Childcare Trust. The overall cost remains at £750m a year because the Treasury has revised its estimate of the number of families likely to be eligible for the scheme down from 2.5 million to 1.9 million. Ministers have also responded to complaints that the package would punish poorer parents in receipt of universal credit not paying income tax by agreeing they will receive help with 85% of child care costs, rather than the previous plan of 80%, a move that could save low-income families as much as £1,500 a year.
The scheme will be available to families working part-time because of the low minimum earning threshold of £50 a week, but is also on offer right up the income scale to parents jointly earning up to £300,000 a year.
The childcare subsidy comes as concern mounts among the Liberal Democrats about the cost and diminishing help offered to Britain’s poorest workers by the budget’s other flagship announcement – raising the personal tax allowance to £10,500 from April 2015.