This is what's happening ahead of George Osborne's March Budget on tax relief for childcare. The Government is acutely aware it has little to say to families who are feeling the squeeze on their living standards, other than it will all be worth it in the end. It is particularly worried that it is losing support among women voters.
On cue, smart backbenchers have been advancing arguments for childcare reform. Liz Truss MP has been advocating deregulation of childcare and nursery education, while Harriet Baldwin MP has been making the case for extending childcare vouchers to the self-employed. Newspapers have reported that the Chancellor is sympathetic.
You can see the appeal. Hard-pressed middle class professionals could tick a new box on the tax self-assessment forms for childcare costs. Put in the Ofsted registration number, supply the receipts, and cut your tax bill in half. Or the self-employed, small business owners and freelancers could apply for childcare vouchers to set against their tax and NI bills, just like employees in companies offering salary sacrifice schemes. It all seems so obvious and fair: if I can claim for a laptop as a business expense, why not the nanny?
But this would be a bad use of taxpayers' money. By definition, schemes that offer tax relief give most to those who pay most tax. They favour the better off. That's why pension tax relief for higher and top rate taxpayers is regressive: it gives billions to the better off to invest in their pensions. How can this be justified when support for childcare costs are being cut? Low and middle income families stand to lose up to £1,300 a year from changes in the tax credit system from April. Is this money simply to be transferred to tax relief for families higher up the income scale?
The better option would be to give everyone a stake in a new, universal childcare system. Abolish tax credits and tax reliefs and roll it all up, with extra spending from cuts to higher rate pension tax relief and pensioner freebies, into a new universal childcare programme.
