Tories dodge a bullet on childcare

In the past year the government has proven good at cauterising self-inflicted wounds. This morning's announcement from Iain Duncan Smith on childcare stems another potential bleeder. His department have found an extra £300 million to prevent further cuts to childcare support. It’s a welcome reversal of an ill-advised plan and a narrowly averted political foul-up.

The extra money is needed because of IDS's big welfare reform project, the Universal Credit. One of the big advantages of the UC is that it will smooth out all those ugly ‘cliff-edges’ in the benefit system, particularly rules that say you don’t get help if you work fewer than 16 hours a week. In the case of childcare, the UC will mean 80,000 parents working ‘mini-jobs’ will become eligible for support. Previously, IDS had been trying to make this move on the cheap, by spreading out existing spending more thinly. Today he’s found an extra £300m from the departments ‘Universal Credit implementation fund’ so that he can avoid this Scrooge approach. We should of course ask what else this money might have been spent on. But on childcare, at least, it means he can extend support while protecting existing claimants.

This is a narrow escape for working parents, many of whom are still reeling from a first round of cuts to childcare support made in April. Half a million people, the vast majority women, have lost an average £436 a year, with some losing as much as £1,300. Today’s move does nothing to reverse these earlier cuts but it does mean the government has refrained from punching the bruise by making things worse. With thousands of working mothers already saying that they’re considering quitting work after April’s reductions, further cuts could have proven calamitous. The OBR had already raised concern about the possibility that previous childcare cuts could hit female employment. That, of course, lowers tax revenues, reducing any savings to government.

Yet the timing of today’s move owes more to politics than policy. In recent months, it has become clear that the government’s approach to childcare is one of its biggest political blunders. With the Tories haemorrhaging support among female voters, childcare risks becoming totemic of the government’s lack of empathy with working families. With this concern now top of ministers’ minds, the next question is whether money can be found to reverse April’s cuts. So far, the Chancellor has claimed this impossible. But in a week in which £250m was found for weekly bin collections, that argument looks increasingly fragile.

The irony would be if, after dodging today’s bullet, the government cancels its good work with another self-inflicted wound. As James Forsyth reported yesterday, worrying rumours are coming from Whitehall about plans to make spend on childcare tax deductable. That would almost certainly mean the government subsidising the nannies of millionaires — and, if not accompanied by a reversal of April’s cuts, would also mean funding these subsidies in part by cutting support to dinner ladies on the minimum wage. I understand that right now these are little more than 'ideas floating around'. Let’s hope, not least for the government’s sake, they don’t land.

James Plunkett is Secretary to Commission on Living Standards at the Resolution Foundation