Could childcare cuts be the Coalition’s 10p tax?

The Times urges the Coalition to reconsider the proposed cuts of £1500 for the low income families' childcare costs. The Government would be wise to heed their advice.

The Times’ leader article (£) today urges the Coalition to reconsider the proposed cuts to childcare allowances for low income families. The Government would be wise to heed their advice.

In October, George Osborne used the Spending Review to announce that:

“we will return the childcare element of the Working Tax Credit to its previous 70% level.”

This technocratic sentence means that from April 6th close to half a million families earning less than £30,000 per year will lose up to £1560 per year in tax credits. At present, families can claim 80% of the cost of childcare up to £300 for couples with two or more children and £175 for single parent families. The cut to 70%, which saves £385m by 2013-14, means that many families will lose £30 per week.

The Times are rightly concerned that it will encourage parents to cut back on their hours to take on the childcare themselves rather than making up the difference:

“The Office for Budget Responsibility has already questioned the logic of this move since the Treasury had based its savings calculations on the assumption that no mother would give up work as a result, something that is highly unlikely.”

Gordon Brown’s decision to scrap the 10p tax caused a huge rebellion because the regressive move was seen as fundamentally at odds with Labour’s values even though the original decision cost low-income families the small-by-comparison sum of £232 per year.

The childcare cuts are damaging for the Tories, in particular, since they have claimed to be the party of the family while Iain Duncan Smith has stressed the importance of work. Families are already facing squeezed budgets from rising prices including fuel prices, falling real incomes, and the more publicised cuts to public services and tax credits. This little talked about cut could come back to bite them more than most.

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