Government refuses to clarify possible U-turn over childcare vouchers

The government is refusing to clarify whether it has ditched plans to scrap childcare voucher tax relief, urging employers to wait until next month’s Pre-Budget Report to find out.

Several reports over the weekend claimed prime minister Gordon Brown was set to do a U-turn over his policy to axe childcare tax relief, announced at the Labour Party Conference in September. The government has faced growing pressure from its own MPs that scrapping the benefit would cost the party votes at next year’s general election.

Downing Street ‘insiders’ have reportedly said a revised proposal on childcare vouchers was being drawn up, and would only prevent higher-rate taxpayers – those earning more than £43,875 a year – from being able to claim the relief.

The exemptions, which cost the UK £500m per year, are worth up to £900 for a basic rate taxpayer and £1,200 for a higher rate taxpayer. For every employee who joins a childcare voucher scheme, employers save up to £373 a year.

Nearly three-quarters of those parents involved in the scheme would still be able to benefit, but about 100,000 taxpayers would not, if the revised plans went ahead.

But this morning, the government was keeping quiet on its plans. A spokesman at the Department for Children, Schools and Families told Personnel Today: “We are not saying anything about what is going to be until the Pre-Budget Report.”

Yesterday, children’s secretary Ed Balls said the voucher scheme carried “a lot of dead-weight cost”.

He added: “But there’s also been some concerns raised in recent weeks – the prime minister and the chancellor have both said that we’re going to listen to those concerns. It’s good for the Treasury to listen. And the announcements on the future of tax and tax relief are, rightly, for the pre-Budget Report and the Budget.”

More than 80,000 people have now signed a Number 10 petition to stop Brown from cutting childcare vouchers.

Brown announced in September that no new entrants would be accepted to the scheme after 2011, while the tax relief would end for all people still receiving the vouchers from 2015.

However, a Downing Street spokesman said today: “We have no intention of taking vouchers away from parents who currently receive them. We do plan to phase out tax relief but no-one who gets that relief now will lose it.

“We are, however, always prepared to listen to any concerns that people have to ensure that we continue to provide support for childcare in the most effective way possible within available resources.”

The Pre-Budget Report is due on Wednesday 9 December at 12:30pm.

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