Baiting the hook to make work pay

Baiting the hook to make work pay

29th November 2013

Given that Scottish Nationalists are baiting their offer for next year’s referendum with vastly expanded universal free childcare, it is clear that generosity in this policy area is seen as a safe electoral carrot.

Indeed this is why the Coalition pledged to spend almost a billion pounds on childcare subsidies for families where both parents work and each earn less than £150,000 per year.

Yet it’s highly ironic, in these austere times, that the state is subsidising families with a combined income of almost £300,000 to the tune of £1200 per child.

Of course, good quality affordable childcare can have clear social benefits in terms of helping to narrow educational gaps and enabling poorer parents to work their way out of poverty. Relying on survey data that says ‘more than half of all stay-at-home mothers would prefer to be in paid employment’, the Government also claims to be supporting parents’ choice to work higher up the income spectrum.

Importantly there is a commitment to give all parents on Universal Credit earning enough to pay income tax more help with childcare, covering them for up to 85 per cent of total costs.

Given concerns that any extra pay earned through increased working hours would be swallowed up in childcare costs, this measure is vital for the fulfilment of welfare reform’s promise to make work pay.

However, there is an important group, potentially 100,000 families strong, that has been completely overlooked in these childcare reforms.

For those earning too little to pay income tax, there will be no additional subsidy meaning only 70 per cent of their childcare will be paid – 15 per cent less than their wealthier counterparts. This undermines both the Government’s claim that Universal Credit will put more money in the family purse with every hour of work and its aim to help those in low-paid jobs stick with and progress in work.

The forthcoming Autumn Statement must address the anomaly. If not we will face the scenario of public money being given to wealthy parents while it is denied to families trying to do the right thing but still earning too low an income to qualify.

Next week the Chancellor can show he is genuinely on the side of those who want to work but are finding that high childcare costs don’t make work pay. If they want to spend a billion pounds on childcare they have to consider where on the income scale investment can be most effective.
And while it is right that the Government should be looking at how best to help parents pay for childcare, we must also remember in this debate those parents who want to make a positive choice to stay at home and look after their children.

 The Early Years Commission for the Centre for Social Justice found that 88 per cent of parents and 82 per cent of adults, consistent across all income groups, thought more should be done to help parents wanting to stay at home and bring up their children in the early years.

Supporting parents in a range of ways has enormous social and economic benefits…but politicians should remember that the perceived fairness in how these issues play out carries huge electoral clout too.