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Prime Minister's proposed phasing out of tax relief on childcare vouchers gets hostile reception


Industry leaders have expressed anger at Gordon Brown's announcement yesterday that hinted tax efficient childcare vouchers could be scrapped.

HM Revenue and Customs (HMRC) has confirmed this morning that tax relief on childcare for higher earning parents will be curbed. But a spokesman from HMRC emphasised: "The Government is not abolishing childcare vouchers, only phasing out tax relief for them.
"Vouchers are now well-entrenched, employers will still be able to offer them, and existing users will be unaffected for five years." 

But he added: "We need to take tough choices at this time, to focus resources where they are most needed - helping disadvantaged young children access high-quality care that promotes child development.

"Tax relief for vouchers is not delivering against the Government's priorities. It is not fair that around a third of tax relief for childcare goes to the 6% of parents who pay tax at the higher rate. In fact, it can go to wealthy parents to pay for discretionary activities such as music lessons, dance classes or horse-riding, rather than core childcare that supports child development in the early years."

According to HMRC, low and middle-income working parents will continue to benefit from childcare support through tax credits that is much more generous than tax relief on vouchers: 470,000 parents are currently benefiting by £68 per week on average.

But Simon Moore, managing director of Busy Bees Childcare Vouchers, said: "Working parents, already struggling under heavy financial pressures, could be dealt a devastating blow if a move to scrap the existing childcare vouchers system, as has been hinted yesterday, is carried out by the next Labour government.

"In his speech this afternoon, Gordon Brown signalled that childcare is to be a key battleground in the upcoming election.

"He has proposed that an extension be introduced to the free childcare places scheme - but it has been hinted that this extension may come at the expense of the childcare vouchers system.

"Scrapping tax-efficient vouchers would hit the very core of people Gordon Brown is professing to care for, as a huge portion of parents taking vouchers from us are employed in the NHS, emergency services and small to medium-sized enterprises.

"While plans to scrap the scheme are yet to be confirmed by Gordon Brown, we are shocked that any such move is even being considered. It is one that will wound the British middle classes, the very people the party claims to be fighting for.

"What the prime minister should be doing is expanding the voucher model into other communities that sorely need the tax saving they provide, such as the elderly care market, where families are struggling to fund the care of older relatives in nursing homes across the UK. While in power, Labour has really missed a trick in the wider applications and benefits that the vouchers system, as a close-loop system, can offer."