One option under consideration is a model for making electronic payments direct to childcare providers.
A joint discussion paper by the Treasury and HMRC looks at a range of options for improving how childcare support for parents is delivered through tax credits.
The failure of tax credits to increase access to childcare for families was highlighted last week in research that showed that the number of parents accessing Working Tax Credit has not risen since 2004 (News, page 4).
Another option for consideration is the 'income bands model', similar to a system in place in New Zealand, which is based on putting parental income into three broad bands rather than calculating support based on exact income. The paper said this would mean the system was simpler to understand but would also mean 'rough justice' for families 'just either side of a step'.
Chief executive of 4Children Anne Longfield said, 'We are pleased the review will also look at the issue of who the childcare element of the tax credit should be paid to. 4Children has long advocated that the credit should be paid directly to providers on the parents' behalf. This would reduce the financial burden on parents and would ensure that the full impact of the credit was felt by the sector, so aiding sustainability.'
Further information:
The consultation, 'Tax credits: improving delivery and choice - a discussion paper' is at www.hm-treasury.gov.uk./media/D/3/tax_credits_no12.pdf. The closing date for responses is 5 September.
