Childcare tax relief decision unlikely to be reversed by Tories and Lib Dems

If the government does abolish tax relief on childcare vouchers, it is unlikely that the main opposition parties would bring it back – even though they oppose the plans.

Reward & Benefits Today asked the Conservative Party and the Liberal Democrats what they would do should Gordon Brown carry out his proposal to end tax relief on the vouchers by 2015.

The Conservatives said: “This is a time when many families face financial pressure and may need now, more than ever, to have affordable access to childcare. We believe the government is wrong to scrap this support which so many parents rely on.

“However, in this difficult economic climate, we cannot commit to reinstating the tax and national insurance exemptions.”

The Lib Dems said they have an “ambitious policy” for providing “good quality” childcare. “This policy includes providing parental leave of up to 19 months to be shared between both parents and universal free childcare of up to 20 hours per week from the time a child is 18 months old.

“Childcare vouchers would not exist in our model, but of course that is for the future. We believe that the withdrawal of the vouchers at this stage would potentially destabilise the childcare market with the withdrawal of tax relief. We are therefore opposed to the government’s plans for the withdrawal of tax relief on vouchers.”

Although many Labour MPs, including prominent backbenchers such as Patricia Hewitt and Caroline Flint, asked the government to think again, it will not be until the pre-Budget statement on 9 December that the party’s intentions on tax relief will become clear, though a partial U-turn is likely.

Meanwhile, the benefits sector is campaigning to halt the government’s plans through an online petition and representations to MPs. Some recognise that the abolition of tax relief could be a body-blow to the sector.

For example, Simon Moore, managing director of Computershare Voucher Services, whose voucher scheme is used by 14,000 employers, said: This move is a major threat to the benefits industry because it is by far the number-one used and appreciated benefit in existence.”

Also, a poll of Institute of Payroll Professionals’ members carried out earlier this month found that four out of five do not think employers will continue with childcare voucher schemes if tax relief on them is abolished.