To loud fanfare the Government is proposing to make up to £2000 work of Childcare Tax deductible.
Whilst this may be great for those who pay tax it does nothing for those at the bottom of the earnings ladder; those on Minimum Wage who are paid so little that they don’t get above the tax thresholds. Because they will get no extra benefit from this proposal. And part of this Government’s policy is to raise thresholds. So many people on Minimum wage have no taxable element to offset their childcare costs against.
And you might just remember that one of the first things this Government did was to cut the rate of childcare support for the poorest by lowering the childcare element of Working Tax Credit from 80% of costs to 70%.
Tax Breaks will also benefit couples more than lone parents as they have two incomes on which they can save money.
And my guess is that what would probably happen is that the extra funding made available to middle class parents from tax breaks make childcare even more expensive and squeezes low income families even further.
So this is a bad way to spend limited resources. But might go down very well with high income families including many comment journalists – so expect some positive coverage in the coming weeks.