On the first day of Conservative Party Conference, Kemi Badenoch has announced that a future Conservative government will end the childcare ‘cliff edge’ which penalises working parents when they increase their earnings.
Currently, when one parent’s earnings exceed £100,000, even by only £1, a working couple lose their entire entitlement of up to 30 hours a week of childcare support as well as losing access to the Tax-Free Childcare scheme.
This can mean some parents are better off earning £99,999 than earning tens of thousands of pounds more.
For example, a parent with two children at nursery in London would need to earn nearly £150,000 to be better off than earning just below the £100,000 threshold, according to the Institute for Fiscal Studies.
The cliff edge punishes parents for working more, working harder, seeking a promotion or moving to a better-paid job. It makes it more difficult for aspiring couples to juggle a career with raising a family, meaning some might choose not to have children, or delay having children until their incomes change.
The impact of the cliff edge has also grown significantly as a result of the expansion of the free childcare offer in recent years and fiscal drag.
Removing the cliff edge would make life easier for thousands of parents who are working hard and paying their taxes, as well as boosting economic growth through improved incentives to work and become more productive.
It would also tackle the unfairness of a threshold that is calculated on an individual earner’s income, not on a household basis.
The current system means two households could be treated radically differently depending on how they choose to arrange their work and childcare. Our plans will also simplify the system for childcare providers.
Every family will find its own balance between work and caring for children.
This reform is one part of a wider Conservative approach to making family life more affordable and supporting parents in the choices that work best for them.
The extension of childcare support to all working parents would be fully funded through new savings from public spending set out by the Conservatives today, in line with the Golden Economic Rule.
This announcement forms the first step in a broader Conservative tax reform agenda which will look at all aspects of the system which are damaging incentives to work or invest and holding back Britain’s potential.
On Monday Shadow Chancellor Andrew Griffith will expand on this theme in his speech to Conservative Party Conference, setting out our overall objective of taxes which are lower, simpler and fairer.
Kemi Badenoch MP, Leader of the Conservative Party, said:
“Conservatives believe that you shouldn’t be punished for working more, but this childcare cliff edge does exactly that.
“I’m a mum of three and I’ve had to make the same choices many families have had to make on work and childcare. Those choices are difficult already, Government should not be making them harder.
“It is absurd that earning just one extra pound can leave a family thousands of pounds worse off. No one should be turning down a promotion or a pay rise because they literally cannot afford to earn more.
“It is often women who end up carrying more of the childcare responsibility so a system that makes it harder for them to progress in their careers is not helping families, it is not helping women and it is definitely not helping the economy.”
Andrew Griffith MP, Shadow Chancellor of the Exchequer, said:
“Removing this childcare cliff edge is the first step in our mission to deliver lower, simpler, and fairer taxes across the board. We need a tax system which gives people the right incentives – supporting those who work hard, invest and run businesses here in Britain.
“Hardworking parents should not be punished just for trying to juggle a successful career with raising a family.”
Laura Trott MP, Shadow Secretary of State for Education, said:
“The childcare cliff edge creates problems for families, workplaces and nurseries - it means promotions turned down, hours reduced and endless forms.
“That’s why the Conservatives would abolish the £100,000 childcare cliff edge for both free childcare hours and Tax-Free Childcare, so parents have the freedom to make decisions about work and childcare based on what is right for their family.”
