Wednesday, May 30, 2012
MAKING CHILDCARE AFFORDABLE - REFORMING THE TAX SYSTEM
For households with young children and parents working, the results were not surprising.
It showed that, since 2011, nursery costs have risen by nearly 6 per cent. This means that at a time when wages have been largely frozen, the average yearly expenditure for a child under two is now just over £5,000.
However, that depends on where you live in the UK and the most expensive nursery recorded by the survey costs £300 for 25 hours care or £15,000 per annum.
Childminder costs have also risen by 3.2 per cent for a child under two, and 3.9 per cent for a child aged two and over. As a result, childcare costs now swallow up 27 per cent of UK parents' net income every year.
But it is not only the costs that are the issue.
A report for the CentreForum thinktank by the Conservative MP Elizabeth Truss suggests that while the number of nursery places has increased since 1996, the number of childminder places has dropped to 245,000 over the same period.
According to Truss, this is down to current regulations that restrict childminding services to three children for every adult caring for them. This differs from other countries, such as the, Germany, Ireland and Netherlands, where the ratio is currently 5:1.
By reforming the current rules, Truss believes that not only would childminding become more affordable it would also, through attracting higher quality individuals into the service, improve the quality of care. She also argues that any concerns over child safety could be dealt with through local regulation of childcare services.
Certainly, for working families currently under financial pressures, there needs to be some way of ensuring that they can gain access to quality childcare but, more importantly, that they can afford such childcare.
So how can the Government deal with this in times of austerity? One way would be to examine whether, and how, childcare could become tax deductible.
It would enable those who are working to benefit directly and could encourage more women to switch from part-time to full time work.
And whilst political opponents may well say that those that are better off would benefit disproportionately, this could be dealt with by limiting tax relief to the basic rate of tax.
Such a scheme could also be extended to take into account the hundreds of thousands of grandparents who currently act as volunteer childminders to help out their families.
And for a nation that desperately needs more entrepreneurs to start new businesses, such taxable deductions would help the millions of self-employed, who are excluded from the current employers' childcare vouchers scheme, to get support from the government.
Certainly, it is not a new idea and countries such as Canada, where the economy is currently growing strongly, have such a scheme in place.
In the UK, where the focus has been on cutting public expenditure, politicians have been reluctant to discuss such a measure. However, this may finally see the light of day as the Prime Minister himself noted that he is ‘minded’ to consider such an initiative.
Back in 2010, this Conservative-led Government promised radical changes when it came into office, especially in reforming a tax and benefit system that penalises those who work.
A policy where childcare costs can be written off against tax could, if examined and costed properly, be a more practical alternative to the married person's tax allowance that has caused strains in the Coalition and, for two parties struggling in the polls, would be a very popular measure with millions of parents who make up the so-called squeezed middle across the nation.