Flexible help for childcare

Time for child benefit accounts

All three parties will be competing for the ‘family vote’ in 2015. The Tories and Liberal Democrats have pledged a tax-free childcare subsidy of £1,500 per child. Labour has committed to 25 hours’ free nursery education for three- and four-year-olds and a ‘legal guarantee’ of 8am to 6pm childcare at primary schools.

These policies would make a difference but more needs to be done to help families. A part-time nursery place for a child under five costs over £100 a week and childcare costs have risen by 77 per cent over the last decade, according to the Daycare Trust and the Family and Parenting Institute. Childcare for children under three is prohibitively expensive and is becoming unaffordable for an increasing number of families with two or three children.

One way to help parents would be to allow them to use child benefit more flexibly. Parents could be given a child benefit account. They would be able to draw down child benefit at a higher rate than £20.30 per week to pay for childcare. At today’s prices child benefit up until young people cease to be eligible at 18 is worth £19,000 and £12,542 respectively for a first and second child. It therefore makes sense to think seriously about how child benefit can be used to best effect by families over a child’s lifetime.

Child benefit accounts would give parents greater choice. Managing family finances on statutory maternity pay has never been easy. Many women find working in a demanding job, particularly if it involves commuting and frequent travel, is not feasible without flexible childcare.

Nursery places have increased, but for women working in sectors such as healthcare, the arts and hospitality, home-based childcare is required. It is rare for nurseries to open outside the hours of 8am to 6pm from Monday to Friday. Yet for growing numbers of parents their working hours are very different. Childcare policy must reflect the reality of people’s working lives.

If more women pursue their careers while their children are young, they will earn more money and their families will be better off. The Treasury would benefit from increased tax revenues from more women working and earning higher salaries. IPPR has estimated that investing in childcare pays a return to the government of £20,050 (over four years) in terms of tax revenue minus the cost of childcare for every woman who returns to full-time employment after one year of maternity leave. And yet the gender pay gap is 15 per cent and only two FTSE 100 companies have a female chief executive.

Parents would need to be confident that their earnings would increase as their children grew older as they will have exhausted all or most of their child benefit entitlement. Child benefit accounts will appeal to women who want to have a career and a family. Women are in a minority in senior roles and supporting them when their children are young would help them continue to progress at work.

Politicians are right to be wary of tampering with child benefit. The coalition was forced to modify its plans to withdraw child benefit from families containing at least one top-rate taxpayer after a public outcry. However, child benefit has remained largely unaltered for nearly 70 years while work and family life have changed radically. The ‘family allowance’ was introduced in 1946 and was designed for a male breadwinner working full-time to support his wife and children. In 1978 family allowance was renamed ‘child benefit’ and was paid for the first child as well as younger children, at the same rate, regardless of the age of the child. For the first time the benefit was paid to mother. In 1991 the rate of child benefit was increased for the first child.

When public finances and family budgets are under unprecedented pressure, politicians must think creatively about how to use existing resources more effectively to meet new political priorities. The next Labour government should introduce child benefit accounts to help parents pay for childcare. Updating child benefit for the 21^st century will contribute to happier families, higher family incomes and more women in senior roles.

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