Page last updated at 13:06 GMT, Sunday, 15 November 2009

Labour 'to listen over childcare'

Mothers with children in pushchairs
About 340,000 parents take part in the vouchers scheme

The government says it is "going to listen" to concerns over plans to scrap tax relief on childcare vouchers.

More than 80,000 people have signed a Downing Street petition urging Gordon Brown to keep the scheme, which saves families up to £2,400 a year.

Children's Secretary Ed Balls said it was "good" ministers were listening.

The government says it wants to move the money to fund more free nursery places for two-year-olds from less privileged homes.

Under a scheme introduced in 2005, working parents can make savings on the cost of childcare by opting to receive £243 of their monthly pay in vouchers before income tax and National Insurance is deducted.

'Dead-weight cost'

This is equivalent to a 31% saving on the first £243 spent on childcare costs each month for basic rate taxpayers, or 51% for higher rate ones.

Mr 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.

Some 88 MPs, 50 of them Labour, have backed a Commons motion warning that this change will worsen the gender pay gap, reduce opportunities and incentives for two parents to work and impair the quality and affordability of childcare.

We do plan to phase out tax relief but no-one who gets that relief now will lose it
Downing Street

But Mr Balls told Sky News: "We've always had support for everyone with childcare and more support for those who need it most.

"The Treasury's been concerned, and I think understandably, that with the tax relief on childcare vouchers, a third of it is only going to 6% of the population - people on the top rate of tax. There's a lot of dead-weight cost there.

"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."

Asked whether the government would reverse its plans, Mr Balls said: "Gordon Brown has been in the past criticised for not listening and not moving fast enough.

"What's happening here is we're listening to the problem which the Treasury has rightly identified."

A Downing Street spokesman said the government remained "totally committed" to supporting hard-working families with childcare costs.

"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."

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