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Deal reached on childcare charges Brown U-turn on childcare charges
(10 minutes later)
Plans to scrap tax breaks for childcare for better-off parents have been scaled back following a revolt by Labour MPs, sources have told the BBC.Plans to scrap tax breaks for childcare for better-off parents have been scaled back following a revolt by Labour MPs, sources have told the BBC.
Top rate taxpayers will see the benefit cut by nearly half rather than scrapped altogether as originally planned.Top rate taxpayers will see the benefit cut by nearly half rather than scrapped altogether as originally planned.
Prime Minister Gordon Brown said the tax break, which is used by 300,000 families to save £2,400 a year, was badly targeted. Labour MP Patricia Hewitt said she was "delighted" by Gordon Brown's decision to back down, telling BBC Radio 4's PM it would lead to a "fairer" system.
But Labour MPs feared the plan to axe it could harm their election chances. But the Tories said the government's childcare policy was in "chaos".
Prime Minister Gordon Brown had argued that the tax break, which is used by 300,000 families to save £2,400 a year, was badly targeted.
But 43 Labour backbenchers threatened to revolt, fearing scrapping it would harm their chances of re-election.
'Right decision'
Now, in a letter to a Labour backbenchers, Mr Brown has confirmed the voucher scheme will continue for the time being - but that higher rate taxpayers will no longer get any extra benefit.
There will be no new entrants to the scheme after 2011, and it will be scrapped entirely by 2015.
All new entrants to the scheme will only get tax relief at the basic rate.
But Downing Street says plans to divert the money saved by scrapping the scheme to expand free childcare for two-year-olds will have to be changed too - and the extra places can now no longer be delivered as quickly.
Former Health Secretary Patricia Hewitt, who was among the Labour MPs campaigning for a change of heart, welcomed the decision.
She told the BBC: "Assuming this has now been confirmed, I'm delighted.
"Gordon Brown and the government have made the right decision on this. What will happen from 2011 is we will continue to be able to give families tax relief on their child care vouchers but in a way which is frankly fairer than the present system."
'Underfunded policies'
But shadow families minister Maria Miller said the U-turn showed that the government's childcare policies are "in chaos".
She said: "Despite the rhetoric about being family friendly, all we seem to get in practice is underfunded policies and U-turns.
"The government has shown neither consistency nor honesty when it comes to childcare.
"This government is more concerned with creating dividing lines than helping parents. Parents and early years providers deserve better."