One of the most ambitious policies for childcare has been dogged by problems, as Mary Evans reports
The Working Families Tax Credit, which boosts the income of low and middle earning families and provides help with childcare costs, is the financial engine of New Labour's drive to get families off benefits and into work. But after 18 months and with a general election looming, is it working?
A glance at the bald facts indicates a cautious yes. According to the latest Government statistics there are 1,168,000 families claiming WFTC, of whom the majority (602,000) are lone parents. About a quarter of WFTC recipients work in personal and protective services, including health and childcare as well as cleaners, and 129,000 families claim its childcare tax credit element at an average value of 35.10 per week. An Inland Revenue spokesman says, 'The number of families receiving support with childcare costs has increased by 174 per cent since WFTC was introduced in October 1999, but we have no way of estimating how many other families could be eligible.'
However, a closer examination indicates that all is not well with WFTC. Part of the problem is the amount of financial help on offer for childcare. A Daycare Trust survey reported recently that a typical full-time nursery place for a two-year-old costs more than 110 a week, while a place with a childminder costs almost 90. So the average claimant of the childcare element still has to find at least 60 a week. This year's budget went some way to meeting calls by the National Day Nurseries Association (NDNA) and the Childcare Commission for more money for childcare by increasing the limits from June (see box below). But much more needs to be spent on providing childcare, while many poor areas lack services on which families can spend their credit.
Debt collectors
Money aside, there are basic problems with the way the childcare credit works - or doesn't, depending on your viewpoint. Childcare professionals from all sectors and all parts of the country have reported fraud and low take-up and complained about over- rigidity in the rules. Nursery World published the same catalogue of complaints last year after the first six months of WFTC. There seems to have been little improvement, except that providers are getting sharper at deterring fraud by telling claimants they are being audited by the Inland Revenue or are subject to spot-checks. Although such tactics are effective, they make childcarers resentful of the system. There are fears that some settings, to avoid the extra bureaucracy and risk of debts, may even refuse places to children whose parents wish to claim the tax credit.
A survey by the NDNA found that while a relatively small number of parents claim WFTC, fraudulent abuse of the system has left many nurseries being owed thousands of pounds. Rosalind Taylor, joint proprietor of seven Puffins Daycare centres in Devon, says, 'We have a lot of people who have taken up places who wouldn't have done so without WFTC. There are a lot of genuine people who are benefiting from this, and as a business we have benefited from it too. There are just one or two people who play the system unfairly and cause so much damage.'
She supports the call from the NDNA for the credit to be paid direct to childcare providers in order to eliminate fraud where parents enrol children with a setting, claim the credit and then either remove the child or cut the hours they attend. Mrs Taylor says chasing up WFTC debts, which at one stage stood at around 5,000, takes half a day a week. 'We are in business because we are interested in childcare, not debt recovery,' she says. 'I am a taxpayer and I resent this waste of my money.'
Complaints backlog
Sandra Hutchison, owner of the Primley Park Nurseries chain in Leeds and chair of Leeds Private Nursery Association, conducted a local survey on WFTC on the Association's behalf. The results have not yet been analysed, but she has anecdotal evidence that nurseries are considering not taking claimants. One nursery was 5,500 in debt because of WFTC. Ms Hutchison wrote to the Inland Revenue reporting parents whom she knew were claiming the credit but were not paying her fees. 'The IR rang me and were sympathetic and told me to write to my MP to get my complaint a higher profile, because they had such a backlog.'
The National Childminding Association has had a similar response from the Government to its monthly reports of members' complaints, but it has seen no concrete action. Chief executive Gill Haynes says, 'They are sympathetic but don't really see it as a big problem. However, many of our members do - and they believe that the recorded cases are just the tip of the iceberg. They believe it really is not working very well.'
She quotes the experience of a Leicester childminder who is quitting after 13 years. 'She has had two parents claiming WFTC who left without notice.' She has a childcare qualification and took children excluded from school and provided foster care respite, but she has had enough.
Despite the Government's 12m publicity campaign, childcare professionals report a low take-up of WFTC among childcare staff themselves as well as parents. Sue Marsden, manager of the wraparound project at Kirklees Early Years Development and Childcare Partnership, says, 'Parents simply don't know about it. During Childcare Week we will be running surgeries on WFTC.'
Red tape tangles
Those who do claim the credit can fall foul of the inflexible regulations governing it. Awards run for six months regardless of whether a claimant's circumstances change. Mrs Taylor cites several cases of parents experiencing problems with rigid rules. For example, a Puffins staff member returned from maternity leave and found after a few weeks that she could take on more hours - but was unable to claim more credit until six months was up. A parent going to university is losing her WFTC on the grounds that her student loan puts her over the savings limit of 8,000 or less. Another parent was advised to claim while on a six-week training course and the award ran for the full six months, long after it was needed. Another problem is that to qualify for WFTC, claimants must work 16 hours a week, but many part-time jobs are for only 15 hours.
Maggie Simpson, national development officer for the Scottish Childminding Association, stresses that while many people have gained from the childcare element of WFTC, 'it's a shame it's still marred by bureaucracy'. Working Families Tax Credit, she says, should be evolving.
Working Families Tax Credit explained
WFTC is a credit for low-and middle-income families. Its elements, including Budget increases coming into effect in June, are:
- A basic tax credit of 59pw (one per family)
- A 30 hours credit of 11.45pw (where one earner works at least 30 hours per week)
- A credit of 26pw for each child aged under 16
- A childcare credit of up to 70 per cent of eligible childcare costs to a maximum of 135pw for one child and 200 for two or more children.
To qualify for WFTC, families have to:
- Have one or more children
- Work at least 16 hours a week. Both parents don't have to be working
- Reside in the UK and be entitled to work here
- Have savings of 8,000 or less.
The childcare credit, for families meeting the WFTC criteria, is available where:
- Lone parents/couples work 16 hours or more a week
- The child/children cared for is/are aged from birth to the September after the child's 15th birthday
Income ceilings depend on family circumstances, but a lone parent with a child aged under 11 earning up to 27,000 per year and a couple with two children earning jointly up to 34,000, would qualify. The childcare must be registered. The amount a claimant gets depends on their earnings and the number of children.
Meanwhile the Government has replaced the Married Couple's Allowance with the Children's Tax Credit, at 10 a week or 520 a year. From this April, the credit in the first year of a child's life is worth 1,040 or 20 a week. The income ceilings are higher than for WFTC.
