Take a break

The Government's campaign to assist working parents and eradicate child poverty enters a fresh phase next year with a new tax exemption scheme for employer-supported childcare and the introduction of baby bonds.

The aim is to break the cycle of deprivation that sees poor children grow up to become poor adults and ultimately poor pensioners, by encouraging parents to work and save.

Government ministers are also currently working on the fine detail of their new scheme to extend the range of childcare for which parents will be able to get financial support.

From the start of the next tax year, staff whose employers provide either approved childcare or vouchers for approved childcare, will be able to receive up to 50 a week of childcare free of tax and national insurance.

This could be worth 2,000 a year for higher income families where both partners work and their employers implement the scheme. The main conditions for the exemption will be that the childcare benefit is made available to all employees, and that it is either registered childcare or approved home childcare.

Although the tax break has been capped at 50 a week, there is scope for it to be increased, says John Woodward, director of Busy Bees nursery chain, which runs a childcare voucher business. He says the changes represent a 'huge benefit to working parents and will be of a similar benefit to childcare providers. It is giving them the ability to make their provision more affordable to users.'

The tax break proposals will be included in the Finance Bill, the legislative measure which enacts the Budget, which goes through Parliament this summer. The Government is setting up a forum of leading childcare providers, organisations and agencies to work in partnership with it to support and promote the scheme widely.

Stephen Burke, Daycare Trust director, says it is crucial that employers are able to access clear and consistent information on how to implement it. 'I would argue that what we will need is a national helpline for employers run by the Inland Revenue.'

Chancellor Gordon Brown also announced in his Budget a new 'light-touch' voluntary scheme giving accreditation for financial support purposes to a broader range of childcare. This will enable more working parents to access financial support.

A consultation exercise this summer will consider proposals including extending accreditation to nannies, family members whom parents pay for childcare, and breakfast- and after- school clubs. From June, parents using breakfast clubs run by schools and those paying for childcare provided by foster carers will be eligible for help through the childcare element of the Working Tax Credit.

An Inland Revenue spokesman says, 'The light touch voluntary accreditation scheme will extend the range of good quality childcare eligible for financial support, through either the childcare element of the Working Tax Credit or the new provisions on employer supported childcare.'

However, there are concerns within the sector about monitoring the scheme. Rosemary Murphy, chief executive of the National Day Nurseries Association, says, 'Gordon Brown's hints at a new light-touch voluntary accreditation scheme to extend the range of good quality childcare eligible for financial support should sound alarm bells for everyone concerned about quality. We cannot move down a route that will give support to informal care, without threatening the viability of existing provision.'

Meanwhile, the Government has announced details of how the new baby bonds will operate. A Treasury spokesman says the Child Trust Fund will be a savings and investment account. It will 'help to strengthen the savings habit of future generations, spread the benefits of assets' ownership to all, educate people in the need for savings and give young people a basic understanding of financial products.'