Families lose £420 as child support cut back

More than 40,000 families in Scotland are set to lose an average of £420 a year towards their childcare costs thanks to tax changes that come into force in three months.

However, research has revealed some households will lose as much as £1300 in the shake-up, branded by critics as anti-family, which stems from controversial amendments to the childcare element of the Working Tax Credit.

This is the means-tested support provided by the UK Government to boost the incomes of poorer households. The changes were announced by Chancellor George Osborne in his autumn spending review and come into force in April.

Under the current system, working parents can claim support for up to 80% of the costs of their childcare but, from April, that figure will fall to 70%. At present, more than two million Britons receive the credits, with around 450,000 working households claiming the childcare element of the tax credit. Most recipients earn less than £30,000 a year.

Gavin Kelly, chief executive of the Resolution Foundation – the independent think-tank which works to help Britain’s 11 million low-to-middle earners and which calculated the figures – said: “For working mums on low-to-middle incomes losses like these will be hard to bear. Many parents find support with childcare costs absolutely essential to staying in work and the big worry is some will now find that work doesn’t pay.”

He stressed the cuts in childcare support could not have come at a worse time for families, and added: “With wages rising more slowly than inflation, households will get poorer, even before cuts are factored in.”

The think-tank said a recent survey found as many as one in three working parents was considering giving up their job because they felt unable to cope with childcare costs. Since 2002, the price of a nursery place has risen by more than 20% in real terms. A typical full-time nursery place in Scotland now costs £158 a week.

Douglas Alexander, the Shadow Work and Pensions Secretary, said: “These cuts to childcare will make it harder, not easier, for parents to get the work to help make ends meet.”

Labour’s Ann Begg, who chairs the House of Commons work and pensions committee, said the cut would be a disincentive for mothers to work.

The Aberdeen South MP added: “These are the families who are trying to do exactly what the Government wants – to stay in work and not become dependent on benefits. These are the ones who will lose out because of the changes. There will be people for whom it will not be economical to be in work because childcare costs will be more than they earn.”

The planned cut in support will save the Treasury £270 million next year, rising to £385m in 2014/15.

A spokesman said: “This report ignores the Government’s wider tax and welfare reforms. We’ve had to tackle a record peacetime budget deficit …  as fairly as possible.”

Dundee is the local authority area that will be hardest hit – 1690 families will suffer cuts in childcare support of £482. North Lanarkshire, will see 2700 families suffer a £460 reduction and, in Aberdeen, there will be 1280 families who will suffer a £454 loss. In West Lothian, cuts of £451 will affect 1490 households.

Glasgow has 5910 families who will be affected by reductions of £423 and, in Edinburgh, there will be 3020 who will see cuts of £405.