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| Childcare: families on universal credit will get 85% of cost met, says Clegg | |
| (35 minutes later) | |
| The government will meet 85% of the childcare costs of poorer families on the new universal credit, Nick Clegg has said as he hailed a "balanced package" of new state help. | The government will meet 85% of the childcare costs of poorer families on the new universal credit, Nick Clegg has said as he hailed a "balanced package" of new state help. |
| However, the deputy prime minister admitted that the new system, in which 2 million families would be offered up to £2,000 a year of state help per child towards the costs of care, would benefit rich parents on joint incomes of up £300,000. | However, the deputy prime minister admitted that the new system, in which 2 million families would be offered up to £2,000 a year of state help per child towards the costs of care, would benefit rich parents on joint incomes of up £300,000. |
| But he said the government would target help to poorer families by agreeing that those on universal credit would receive help with 85% of childcare costs, rather than the previously planned 80%. This could save low-income families as much as £1,500 a year. | But he said the government would target help to poorer families by agreeing that those on universal credit would receive help with 85% of childcare costs, rather than the previously planned 80%. This could save low-income families as much as £1,500 a year. |
| Clegg told the Today programme on BBC Radio 4 on Tuesday: "We are adding to [fairness] in the announcement today to make sure that specific help is targeted for those families on low income. So, for instance when the big change in the welfare system – the introduction of the universal credit – comes on stream we are announcing today that 85% of your childcare costs, if you are on universal credit, will be covered. And for the first time we are introducing an early years pupil premium. | Clegg told the Today programme on BBC Radio 4 on Tuesday: "We are adding to [fairness] in the announcement today to make sure that specific help is targeted for those families on low income. So, for instance when the big change in the welfare system – the introduction of the universal credit – comes on stream we are announcing today that 85% of your childcare costs, if you are on universal credit, will be covered. And for the first time we are introducing an early years pupil premium. |
| "That will target resources at those nurseries, those childcare settings which cater for the children, for the toddlers from the very poorest families. So it is a very big but also a very fair package which targets resources at those who need it most." | "That will target resources at those nurseries, those childcare settings which cater for the children, for the toddlers from the very poorest families. So it is a very big but also a very fair package which targets resources at those who need it most." |
| The deputy prime minister was speaking after the government announced its package of childcare support – one of the coalition's central election offers to middle-class working parents – would be available, when launched, for anyone with children up to the age of 12 instead of the previous cut-off age of five. | The deputy prime minister was speaking after the government announced its package of childcare support – one of the coalition's central election offers to middle-class working parents – would be available, when launched, for anyone with children up to the age of 12 instead of the previous cut-off age of five. |
| The £2,000 maximum is to cover 20% of the costs of childcare up to an annual maximum of £10,000 a year. No extra support is available for people with more expensive provision. | The £2,000 maximum is to cover 20% of the costs of childcare up to an annual maximum of £10,000 a year. No extra support is available for people with more expensive provision. |
| The package, originally unveiled a year ago, was to have been worth a maximum of £1,200 per child. It would be introduced in a single year in autumn 2015, rather than being phased over seven years. An extra £50m has also been found to provide extra help for children aged three or four from the poorest families. | The package, originally unveiled a year ago, was to have been worth a maximum of £1,200 per child. It would be introduced in a single year in autumn 2015, rather than being phased over seven years. An extra £50m has also been found to provide extra help for children aged three or four from the poorest families. |
| Clegg admitted that the scheme would benefit the better off. It would be available if both parents were working on incomes of up to £150,000 each. | Clegg admitted that the scheme would benefit the better off. It would be available if both parents were working on incomes of up to £150,000 each. |
| He told Today: "People who are on higher than average incomes – yes, they will benefit from this. We decided to do that because the more we looked at introducing a cut-off point at different income levels, the more complex it became. | He told Today: "People who are on higher than average incomes – yes, they will benefit from this. We decided to do that because the more we looked at introducing a cut-off point at different income levels, the more complex it became. |
| "What families tell us is they want it to be done as simply as possible. That is also the reason why we are making additional announcements today to cover 85% of the costs for lower income families on universal credit and introducing an early years pupil premium for the first time ever. So it is a balanced package but it is also a very simple one." | "What families tell us is they want it to be done as simply as possible. That is also the reason why we are making additional announcements today to cover 85% of the costs for lower income families on universal credit and introducing an early years pupil premium for the first time ever. So it is a balanced package but it is also a very simple one." |
| David Cameron has said that "tax-free childcare will help millions of hard-pressed families" while Clegg highlighted "the £50m cash injection for early education providers to support those children who need extra help in their early years". | David Cameron has said that "tax-free childcare will help millions of hard-pressed families" while Clegg highlighted "the £50m cash injection for early education providers to support those children who need extra help in their early years". |
| However, Labour described the package as "too little, too late". | However, Labour described the package as "too little, too late". |
| Full-time childcare costs for a family with a two-year-old and a five-year-old are estimated at £11,700 a year by the Family and Childcare Trust. | Full-time childcare costs for a family with a two-year-old and a five-year-old are estimated at £11,700 a year by the Family and Childcare Trust. |
| The overall cost remains at £750m a year because the Treasury has revised its estimate of the number of families likely to be eligible for the scheme down from 2.5 million to 1.9 million. | The overall cost remains at £750m a year because the Treasury has revised its estimate of the number of families likely to be eligible for the scheme down from 2.5 million to 1.9 million. |
| The scheme will be available to families working part-time because of the low minimum earning threshold of £50 a week, but is also on offer right up the income scale to parents jointly earning up to £300,000 a year. | The scheme will be available to families working part-time because of the low minimum earning threshold of £50 a week, but is also on offer right up the income scale to parents jointly earning up to £300,000 a year. |
| The childcare subsidy comes as concern mounts among the Liberal Democrats about the cost and diminishing help offered to Britain's poorest workers by the budget's other flagship announcement – raising the personal tax allowance to £10,500 from April 2015. | The childcare subsidy comes as concern mounts among the Liberal Democrats about the cost and diminishing help offered to Britain's poorest workers by the budget's other flagship announcement – raising the personal tax allowance to £10,500 from April 2015. |
| Research by the Resolution Foundation released on Monday shows that three-quarters of the cash gains from lifting the allowance will go to the top half of the income distribution. The findings also suggest that the increase will only take an additional 200,000 people out of tax, but at a total annual cost to the Treasury of £1.4bn. | Research by the Resolution Foundation released on Monday shows that three-quarters of the cash gains from lifting the allowance will go to the top half of the income distribution. The findings also suggest that the increase will only take an additional 200,000 people out of tax, but at a total annual cost to the Treasury of £1.4bn. |
| George Osborne's plan to raise the personal tax allowance in Wednesday's budget from £10,200 to £10,500 a year mean anyone earning less than £10,500 would pay no income tax, but would continue to pay national insurance contributions. | George Osborne's plan to raise the personal tax allowance in Wednesday's budget from £10,200 to £10,500 a year mean anyone earning less than £10,500 would pay no income tax, but would continue to pay national insurance contributions. |
| The average annual benefit to those taken out of tax would be £26, whereas the average annual gain for the vast majority who continue to pay tax would be £56. The Resolution Foundation points out that "only a tiny element of the cost of the policy is spent on lifting people out of income tax altogether". | The average annual benefit to those taken out of tax would be £26, whereas the average annual gain for the vast majority who continue to pay tax would be £56. The Resolution Foundation points out that "only a tiny element of the cost of the policy is spent on lifting people out of income tax altogether". |
| There have been growing calls inside the Liberal Democrat ranks to look at other options for helping the poor, such as raising national insurance thresholds. The business secretary, Vince Cable, is known to have raised concerns about the diminishing returns of the policy for the low paid. | There have been growing calls inside the Liberal Democrat ranks to look at other options for helping the poor, such as raising national insurance thresholds. The business secretary, Vince Cable, is known to have raised concerns about the diminishing returns of the policy for the low paid. |
| The leading thinktank Centre Forum has also urged the party to look at other ways of helping the low paid, such as raising national insurance. But the Lib Dem leadership believes it would be politically suicidal to distance itself in any way from raising the personal tax threshold, especially since it is fighting the chancellor George Osborne to claim undisputed ownership for the single most important tax reform of the parliament. | The leading thinktank Centre Forum has also urged the party to look at other ways of helping the low paid, such as raising national insurance. But the Lib Dem leadership believes it would be politically suicidal to distance itself in any way from raising the personal tax threshold, especially since it is fighting the chancellor George Osborne to claim undisputed ownership for the single most important tax reform of the parliament. |
| In a Guardian article, the Labour leader, Ed Miliband, acknowledges "there is now – belatedly – a growing economy" but says the "key question for any government is whether it will help the millions caught in the crosshairs of a cost-of-living crisis".Alex Hurrell, Resolution Foundation senior analyst, said: "If any party wants to give extra help to the low earners, raising the personal tax allowance does not look like a particularly effective way of doing that. Not only does it help a relatively small number climb out of income tax, it also spreads the benefit of the change right up to people earning more than £100,000 a year." | In a Guardian article, the Labour leader, Ed Miliband, acknowledges "there is now – belatedly – a growing economy" but says the "key question for any government is whether it will help the millions caught in the crosshairs of a cost-of-living crisis".Alex Hurrell, Resolution Foundation senior analyst, said: "If any party wants to give extra help to the low earners, raising the personal tax allowance does not look like a particularly effective way of doing that. Not only does it help a relatively small number climb out of income tax, it also spreads the benefit of the change right up to people earning more than £100,000 a year." |
| Lord Oakeshott, the former Liberal Democrat Treasury spokesman, said: "Raising the income tax starting point to £10,000 is a great Liberal Democrat manifesto achievement but we should declare victory and move on, or we'll become victims of our own success. We've lifted more than 2 million out of income tax but left 1.2 million of them paying national insurance contributions from around £7,750 a year." | Lord Oakeshott, the former Liberal Democrat Treasury spokesman, said: "Raising the income tax starting point to £10,000 is a great Liberal Democrat manifesto achievement but we should declare victory and move on, or we'll become victims of our own success. We've lifted more than 2 million out of income tax but left 1.2 million of them paying national insurance contributions from around £7,750 a year." |