Improving the Affordability of Childcare
Introduction
We want to ensure that good quality childcare is affordable for those who need it. We will be:
- supporting families with children through the announced increases in Child Benefit
- helping working families through the tax and benefits system, in particular through investing some £25 million a year in Scotland in a new childcare tax credit for working families as part of the new Working Families Tax Credit. From October 1999 this will provide help with childcare costs for low and middle income families. In the meantime help available through the childcare disregard in Family Credit will be increased.
- helping parents in education and training, in particular through: doubling the Access Funds in further and higher education to a total of £8.6 million in 1998/99; exploring how the new individual learning accounts can be used to support childcare costs; and help with childcare costs under the New Deal.
3.1. Different families pay widely varying amounts for childcare depending on the type of care they need and what they can afford. For some, especially lone parents who have to rely on a single income, the cost of childcare can be so high that they cannot afford to work. For many other families childcare costs use up a sizeable proportion of disposable family income. We want to open up choices for families on modest incomes.
Support for families with children
3.2. We are determined to tackle the scourge of child poverty. The increases in Child Benefit announced in the Budget will give all families more money to spend on their children’s well-being. The Working Families Tax Credit will mean a better and a fairer deal for around 1.5 million working families with children, including support for childcare costs.
Help for working families through the tax and benefits system
3.3. The previous Government attempted to make childcare more affordable for low income working families by introducing a childcare disregard in family credit and other in-work benefits. This allows an element of earnings to be ignored when in-work benefits are being assessed. We will increase the disregard from £60 to £100 (for families with two or more children in registered care). The maximum additional benefit payable through the disregard is £57.30 per week.
3.4. The childcare disregard in family credit has not proved an effective means of helping working families with childcare costs. An alternative approach is needed. That is why the Government will introduce a childcare tax credit as part of the new Working Families Tax Credit (WFTC) in October 1999 to replace Family Credit.
The childcare tax credit
Any lone parent working 16 hours a week or more, and paying for childcare, will be eligible for the childcare tax credit. Couples will also be eligible where both partners are working for 16 hours or more a week.
The childcare tax credit will:
- cover up to 70 per cent of eligible costs of approved childcare, up to a maximum of £70 a week for families with one child and £105 for families with two or more children. Registered care, childcare on school premises (e.g. out of school clubs) and certain other places exempt from registration are all eligible. These limits have been chosen to ensure that the credit makes a reasonable contribution to family's childcare costs, while encouraging families to make the most cost effective use of childcare;
- be structured so that the lowest earning families will get help and the poorest families will benefit in full;
- give a couple with two children and income below £330 per week (£17,000 per year) the full 70 per cent of their eligible childcare costs;
- reach higher up the income distribution than Family Credit. For example, a couple with two young children who earn £23,400 a year might receive as much as £45 per week.
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Parents in education and training
3.5. Childcare can be a significant cost for students, particularly mature students, in further and higher education. The Scottish Office allocates access funds to the further and higher education sectors each year. Access funds are paid, by further and higher education institutions, to individuals facing financial difficulties in entering or continuing their education. Payments provide for a range of costs associated with learning, including childcare.
3.6. Students attending further education colleges can receive help with childcare costs, in addition to college bursaries, through the Further Education Access Funds. In 1996/97, almost 20 per cent of Further Education Access Funds were allocated to provide assistance with childcare costs. Further education colleges may also be eligible to claim extra funding from the European Social Fund in respect of childcare costs incurred by certain groups of students.
3.7. Higher education students are eligible for childcare assistance from the Higher Education Access Funds. Childcare costs are one of the three main purposes for which the Higher Education Access Funds are used.
3.8. We will:
- use the Teaching and Higher Education Bill to provide a more effective scheme of support higher education students;
- double expenditure from the Access Funds in Scotland from £4.3 million to £8.6 million in 1998/99;
- and extend eligibility to part-time students.
3.9. Childcare costs are also an issue for those taking training courses. Some existing Government programmes such as Career Development Loans, and various training programmes run by Local Enterprise Companies can include help with childcare costs. Providing opportunities for more flexible ways of learning will make it easier for people with childcare responsibilities, as it may reduce their need for childcare. We will therefore look at how our new individual learning accounts might be used to support childcare costs while people are learning.
Parents in the New Deal
3.10. Help with the cost of childcare is available to young people as part of the New Deal for Young People and help with the costs of childcare when searching for work and attending interviews is available under the New Deal for Lone Parents. And as we develop other New Deals we will consider whether help with childcare costs Should be made available.
Consultation point 5
Are there groups of families other than those described in this chapter who merit help with childcare costs?
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