Should we subsidise childcare, and if so, how?

Alan Duncan and Chris Giles
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Chris Giles: Institute for Fiscal Studies

Fiscal Studies, 1996, vol. 17, issue 3, 39-62

Abstract: The subsidy of childcare for pre-school-age children has moved rapidly up the political agenda in the UK, and government policy has developed considerably in this area. In his 1990 Budget, John Major introduced income tax relief for childcare provided by the employer at the workplace. Since October 1994, certain family credit claimants have been entitled to deduct up to £40 per week of childcare expenditure from their income for the family credit means test, and from April 1997, all parents of four-year-olds will be eligible for an annual £1,100 childcare voucher to be used as full or part payment for childcare services. The Labour Party has also long advocated increased state-funded childcare in the form of nursery education for three- and four-year-olds. It favours local education authorities (LEAs) setting targets for the provision of nursery education and points to certain LEAs that already provide nursery education for 90 per cent of three- and four-year- olds. The Liberal Democrats have promised to increase public education expenditure by £2 billion (7 per cent), with the first priority for this extra money being nursery education services.

Date: 1996
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