The claim
“It won’t mean a penny more help for parents already struggling on childcare tax credits”
Liam Byrne MP, Shadow Work and Pensions Secretary, 7 October 2011
The background
With the family purse-strings currently stretched to the limit, any extra pennies to help cover childcare costs are gratefully received.
So today’s move from the government to pump £300m into the Child Tax Credit system, reaching 80,000 more families, sounds like great news – doesn’t it?
FactCheck gets out its red marker pen.
The analysis
Last year’s spending review cut the amount families could claim in credits from up to 80 per cent of their weekly childcare costs, to a max of 70 per cent. The move will save the government £385m by 2014/15.
Save the Children estimates that the cut has added an average of £500 per year onto the childcare bill for half a million families. Of those in severe poverty, the cut has pushed a quarter to give up working entirely – and of those working, 80 per cent agreed that once they’d paid for childcare, their earnings barely covered costs.
Today’s announcement will widen the benefits net to include those working for less than 16 hours a week – who previously weren’t allowed to claim childcare costs.
The move is aimed at helping part-time workers – which account for a third of the UK’s workforce. Anyone working less than 16 hours will be able to claim up to £122.50 a week for one child, or £210 a week for two or more children.
A spokesperson for Child Poverty Action Group told FactCheck that spending £300m brings the budget roughly back to where it was before the Chancellor announced the cuts.
He said: “This is good news for people working shorter hours, but all they are doing it spending it on different people.”
The government claims widening the net will help 80,000 families, of the 7.8m of those in part-time employment.
Questioning that number, FactCheck was told by the Department for Work and Pensions: “80,000 people will be better off in the system because this is the number of families we estimate work less than 16 hours per week and will take up childcare support in UC. We have estimated this number using the modelling tool which we use to undertake all Universal Credit modelling. This is a policy simulation model which encapsulates the tax and benefits system, and population, of Great Britain. It is based on survey data from the Family Resources Survey which is uprated to simulate the current year, together with a few years into the future.”
Will Hadwen, rights advisor at the charity Working Families, remains unconvinced. He told FactCheck: “I don’t see how they can possibly say that, when these are people not claiming anything right now – so how can they tell how many people will claim?”
Mr Hadwen added: “Most people that work part-time have very informal child care arrangements that wouldn’t be eligible for credits.”
To claim, you need to prove how much you pay in childcare, and provide an Ofsted registered number. Grandparents who look after their grandchildren can become registered childminders to help with this, but the parents will only be able to claim if the childcare takes place outside the family home.
Child Poverty Action Group told FactCheck: “We want the Treasury to look at this again – not as accountants but as economists. If they get it right, parents could stay in work and that will cost the Treasury less.”
The move is part of Iain Duncan Smith’s plan to overhaul to the benefits system, introducing a single Universal Credit (UC) replace six income-related work-based benefits in 2013.
The arrival then of the UC and today’s promises to part-time workers is some way off. As the Daycare Trust said: “This announcement means that most parents will receive no less childcare support under UC than they do under Tax Credits today.”
In fact, they point out that for some it will mean less money in 2013, adding: “However, it still amounts to a significant reduction in support for the poorest families who currently receive 95.5 per cent of their childcare costs through Housing Benefit.”
The verdict
Overall, Mr Byrne is right – today’s announcement won’t make a blind bit of difference for the people currently claiming tax credits. Many of this group has already lost up to £30 a week as a result of government cuts – and they won’t be seeing that money return.
According to Save the Children, the cuts have prompted four in ten of the UK’s worst off families to consider giving up work entirely – because they simply don’t earn enough to cover childcare costs.
Extending Universal Credit to those working less than 16 hours a week is a welcome move, and charities have been quick to praise the government for it.
However, many maintain that lowering the credit allowance to 70 per cent hits the poorest hardest.
Plus, it isn’t crystal clear how many people will benefit from today’s move – and with the extra money not on offer until 2013, it does nothing to help parents in the meantime.
By Emma Thelwell
