Today’s announcement on tackling the cost of childcare is welcome, but the direction of travel is worrying. Over the last five years childcare costs have risen by 27 per cent at the same time that many have seen no rise in their wages. But is the announcement as good as it seems?

The expansion of support for people on universal credit is actually going to be funded by cuts to universal credit. And those cuts will not be announced until the autumn statement.

The rest of the scheme has been both expanded and accelerated, yet the costs of implementation have apparently remained the same. How can this be? From 2015, families will be eligible for up to £2,000 (up from £1,200) and those with children under 12 (up from children under five) will be eligible. Those self-employed and in part-time work will also being eligible. Yet, despite this expansion and acceleration, the Treasury estimates that it is still a £750m package because its estimates of eligible families has decreased from 2.5 million families to 1.9 million. This is based on revised estimates to be published as part of the chancellor’s budget tomorrow.

Overall, an expanded system of tax-free childcare is still regressive, skewed to benefitting higher income families and does not necessarily secure lower costs for parents or government. In fact, IPPR analysis shows that tax-free childcare on its own will not make childcare more affordable for families. The government has not got a plan to regulate the childcare market, nor control prices for parents, which makes pumping tax relief into the system a short-term fix with long-term price rise consequences.

These reforms should be used as a down-payment on a more radical extension to support childcare in the next parliament that delivers better outcomes for children, families and society. More radical reforms are still needed. Supply-funded systems that offer direct childcare provision or direct payments to childcare providers are more effective than demand-led systems in both achieving lower net childcare costs and at ensuring high-quality provision. Many of these systems provide at least part of the entitlement free, with a cap on costs for any additional expenditure to ensure fairness. These are also the countries where maternal employment rates are highest.

IPPR’s report Childmind the Gap has shown that there is a tipping point – an amount that balances work incentives for mothers with childcare affordability – of about 10 per cent of family disposable income. This should be the goal in reforming tax credits and vouchers. Reform may have to be done in stages, and providers may need measures which ensure some kind of stability in the transition; but it should remain the ambition.

Across the political spectrum there is now consensus that early years provision is important for both for children’s development and helping parents – especially mums – into work. This is definitely good news but today’s announcement also raises new concerns and there are more worrying signs on the horizon.

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Dalia Ben-Galim is associate director at IPPR. She tweets: @dalia_bengalim

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Photo: National Apprenticeship Week