Liberal Democrat Leader and Deputy Prime Minister Nick Clegg has announced that the Coalition Government will introduce a new £750m scheme for tax-free childcare that will save a typical working family with two children up to £2,400 a year. The Coalition will also extend childcare support under Universal Credit by a further £200m for working people on lower incomes.
The Liberal Democrats are building a stronger economy and a fairer society enabling everyone to get on in life. That’s why we believe helping working families is so important. As well as tax-free childcare, Liberal Democrats are helping working parents by cutting their Income Tax bills, by £600 a year as of April, and extending the amount of free early years education available for all children.
Commenting, Nick Clegg said: “I want to help every family to get on in life. Already we have created a million private sector jobs, put money back in people's pockets by cutting Income Tax and extended free childcare entitlements for pre-school children.
“Delivering tax-free childcare is the next step to ensuring all families can work and get on. The rising cost of childcare is one of the biggest challenges parents face and it means many mums and dads simply can’t afford to work. This not only hurts them financially, but is bad for the economy too. This announcement of a £1bn investment in childcare will make sure it pays to work.
“An extra £1,200 for each child will make a real difference to families who find themselves constantly worrying about how to juggle their family budget. And extending support for working families on Universal Credit will make sure it is worth working extra hours even if you're on low wages.”
The new tax-free childcare scheme will double the amount of support available compared to the current employer supported childcare scheme, opening it to around five times as many families. Once fully up and running, it will be worth up to £1,200 per child. It will be phased in from autumn 2015 and will ultimately be open to around 2.5m families with children under 12.
To be eligible, families will have both parents in work, with each earning less than £150,000 a year, and will not already receive support through tax credits and later, Universal Credit. They will receive 20% – equivalent to the basic rate of tax – of their yearly childcare costs up to £6,000 per child.
The Coalition will also increase the amount of childcare support available through Universal Credit by £200m help improve work incentives and ensure it is worthwhile to work up to full time hours for low and middle income parents.