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Coalition poised to debate childcare costs as gap between rich and poor continues to rise

Article By: Richard Howard, News Editor

Deputy Prime Minister Nick Clegg is on a mission to reduce the cost of childcare bills and encourage more mothers to return to work.

Mr Clegg has been writing to grassroots Liberal Democrats signalling his determination that the issue of childcare costs remains a key government concern.

His intentions to lobby in Whitehall to bring down nursery costs that OECD figures find to be the highest in Europe, comes one week after Work and Pensions Secretary Iain Duncan Smith confirmed details of possible cuts to childcare benefits for households with more than two children.

Courtesy of Liberal Democrat Photostream: Credit Alex Folkes/Fishnik Photography

One policy likely to be considered by the Coalition is upping the state-funded free childcare entitlement for three- and four-year-olds from 15 to 25 hours a week.

£100m of fresh funding was announced by Clegg in September, but a recent report from the Resolution Foundation, which found that thousands of women believe returning to work after pregnancy is not a viable financial option, seems to have added further incentive to his efforts.

Parents will have to wait for the Chancellor’s Autumn Statement, however, before assessing whether their struggles are to be eased or worsened – though the Childcare Commission is also scheduled to publish its conclusions before the end of the year.

In publishing ‘Counting the Costs of Childcare’, think-tank the Resolution Foundation has highlighted the inability of even middle income households to meet nursery costs, calculating that working parents can earn up to £20,000 more than lower income families without seeing any benefit.

Deputy chief executive Vidhya Alakeso, who is also joint author of the report alongside Alex Hurrell, comments: “Despite progress over the last decade the cost of childcare in the UK still eats up a very large slice of family incomes. It’s hardly worth a typical second earner going out to work more than a couple of days a week because the family will be barely better off as the extra money is swallowed up by the costs of childcare.

“This is a serious concern because increasing the level of female employment is one of the key routes through which family living standards have increased. We need major change in our childcare system to ensure that work is always worthwhile – and that working more hours or a pay rise results in higher take home pay.”

With this far from rosy picture, many campaigners are deeply concerned that any further cuts to child benefit may have serious consequences, with professional services firm PricewaterhouseCoopers (PwC) predicting a £50,000 impact on some families.

Iain McMath, managing director of Sodexo Motivation Solutions comments on these figures:

“The Government’s childcare cuts to childcare benefits present a huge challenge for working parents. PwC has estimated that this could cost families as much as a staggering £50,000 over a 16 year period. Yet higher rate tax paying parents as it stands could still manage to recuperate over half of what they are losing.

“Working parents will undoubtedly feel this pain, and I disagree with this move, but it is now more important than ever for parents to consider the options out there to minimise the effect on purse strings. Taking out childcare vouchers as a salary sacrifice scheme can save a high rate tax paying couple almost £1,866 a year. If taken for a child up to the age of 16 this equates for savings of nearly £30,000. This will certainly not eliminate the repercussions to the purse strings that the government’s move will have, but will certainly make it a lot easier to bear.”

Anne Longfield, chief executive of charity 4Children outlines the problem further: “Child benefit is the only universal benefit which recognises the additional costs of raising a child and is an important symbol of the importance we place on putting families first.

“Government’s intention to withdraw child benefit from thousands of hard working families threatens this recognition and will come as a bitter blow to some of these parents who are already struggling against petrol price rises, a 5% increase in the cost of childcare and soaring energy bills.

“The planned change will unfairly penalise single earner households compared with those where both parents earn just below the salary threshold and risk creating a bureaucratic nightmare.

4Children chief executive Anne Longfield: credit Graham Turner/Guardian News & Media Ltd 2011

“We urge Government to reconsider this policy and instead start the New Year by putting families at the heart of the recovery rather than on the frontline of cuts.”

Taking a wider view of the early years, Save the Children has also released a new report on the widening gap between rich and poor around the world, within which the worldwide charity claims children are ‘hardest hit’, with inequality ‘twice as high’ amongst children than in the general population and children’s experience of inequality ‘magnified’ as a result.

Though the report, ‘Born Equal’, focuses largely on the poorest countries, it also points out that disparities in more affluent countries are themselves having an impact on the life expectancy of low-income children.

In the UK, Save the Children blames the impact of indirect taxes on taking away any chance of low-income families improving their lot, stating: “In the UK, between 1980 and 2009–10, tax reform by itself made little difference to income inequality because, while direct taxes reduced inequality, indirect taxes – such as sales tax, value-added tax or goods and services tax – increased it by roughly the same amount.”

The report also states that: “Our case studies serve to demonstrate that tackling rising inequality is as pertinent in the UK as it is in China, India or Nigeria.

Save the Children’s chief executive, Justin Forsyth, comments: “In recent decades the world has made dramatic progress in cutting child deaths and improving opportunities for children; we are now reaching a tipping point where preventable child deaths could be eradicated in our lifetime.

“But this will only happen if we redouble our efforts and tackle inequality. Unless inequality is addressed, any future development framework will simply not succeed in maintaining or accelerating progress.

“What’s more, it will hold individual countries – and the world – back from experiencing real growth and prosperity.”


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